Five ways to team up and deter supplier fraud

Mar 27, 2024

Despite best efforts, Finance leaders struggle to allay the tactics of criminals posing as suppliers. Fraudsters would be easier to deter if Finance had a steady source of accurate supplier information. In practice, though this information is notoriously inaccurate.

The department responsible for managing supplier information, Procurement, works closely with Finance. Yet, the situation has persisted for years. Why? Addressing it is a mammoth task that neither team is rushing to tackle.

Meanwhile, businesses are losing money. It’s time, therefore, to enable success in this area. Here are five steps by which Finance, with Procurement, can address the information struggle for good.

1) Set a solid goal.

Fraud can appear in unexpected places, so ensuring complete coverage and compliance is imperative. Supplier records, therefore, must always be 100% accurate. Any less gives fraudsters a foothold because the teams fighting against them will miss nefarious activities. Will that payment go to a real supplier? Are those bank account changes valid? Do any employees have a relationship with the supplier?

The digital tools with which teams try to spot fraud are also limited by the accuracy of supplier information, as are advancing technologies in AI, cybersecurity and blockchain.

2) Plan for transformation.

Ensuring that supplier data is always accurate, requires the digital environment with which the business manages suppliers to be transformed. It’s a complex task because of the way this setup has evolved. Historically, Finance has used established tools such as procure-to-pay suites to transact with suppliers. As it happens, these suites also store supplier information and so, they get used by Procurement to manage suppliers.

This dual purpose is problematic. Procurement teams need to manage supplier information and automate complex governance workflows on scale, for which suites aren’t designed. So, they become overloaded with inaccurate data. Further, they don’t integrate well with other tools. When any specialist tools are used to engage suppliers, this weakens the suite’s data controls.

To fix this conundrum Finance must support Procurement in reconfiguring the digital landscape in which suppliers work, to reach 100% accuracy in supplier records.

3) Start strong, early.

The first consideration in rebuilding the landscape is to give priority to master data. As such, every relevant supplier detail must be captured at the start of every relationship. This is done by adding processes to check and verify all incoming information, including third-party data sources (e.g. validating suppliers’ credentials against their bank details).

Treat this as an opportunity to set up structured, controlled, dependable processes.

4) Defend resulting data.

With a system established for capturing new supplier information, next, the resulting data must be protected. Fresh entries are likely to change quickly, making the data obsolete.

There must be no weak spots for fraudsters to exploit so, the next step is adding a process to support data changes. Include all necessary checks and balances – for example, run workflows from purchase requests through to invoice matching, build legitimate communication channels, and establish robust ways for people to edit supplier data and change invoices.

5) Restrict

The final step to securing 100% accuracy is to funnel all data through a single front door and (if granted access) into a golden record. This way, it can be used by a variety of tools and people and remain accurate. This will save much pain down the line and reduce the need for hot fixes like data cleansing.

With a golden record established, a higher level of compliance will be possible. At this point, expensive fraud-fighting teams and tools will be poised and ready for continued success.

About the author: Costas Xyloyiannis is co-founder and CEO of HICX, the leading supplier experience management solution. Costas founded HICX in 2012 to address the challenges of bad supplier data in the enterprise.

He holds a Master’s degree in Computer Science from Imperial College London and has 20 years’ experience in helping some of the world’s largest companies to take control of their supplier data and deliver a superior supplier experience.

He strongly believes in the importance of data and supplier-centricity, as a foundation for digital transformation in business, and is a regular speaker and contributor on this topic.

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