Financial Operations Network | Compliance and Vendor Onboarding: What You Don’t Verify Can Hurt You
A successful fraud depends on lack of vendor validation; get that tax ID; and check vendors against OFAC’s SDN database…
Vendor validation, vendor onboarding, payables fraud, payables compliance
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Compliance and Vendor Onboarding: What You Don’t Verify Can Hurt You

Compliance and Vendor Onboarding: What You Don’t Verify Can Hurt You

Errors in vendor information increase both cost and risk.

True Story

How many times have you received a donation request for a worthy cause or the needy? In most cases the donation seeker is a legitimate organization, but fraud is not uncommon.

In one actual instance, many companies received a letter, purporting to be from the Red Cross, requesting a donation due to natural disasters that had left the organization unable to provide support and rescue. In many companies this request was approved by an in-house manager, a general ledger code was provided and a donation check was issued and mailed.

As it turned out, hundreds of thousands of dollars from well-intentioned companies went to a doctor who had set up post office boxes all over the country to commit this fraud. It took the FBI a long time to catch up with him because he would close the post office boxes in 30 days and move elsewhere.

How did so many companies manage to fall for this fraud?

  • Error number 1: No one questioned the validity of the request from what appeared to be the Red Cross;
  • Error number 2: The address was never verified.

Checking the U.S. Postal Service address verification database or a phone call to the Red Cross headquarters to verify the accuracy of the post office box would have been all that was needed to avoid this huge theft!

Fraud, especially in difficult financial times, is increasing. Validating vendors to confirm their legitimacy and correct address can help deter fraud within a company.

W-8 and W-9 Processing

Before making payments to vendors, organizations are responsible for obtaining from vendors the appropriate forms, including tax forms such as W-9’s and W-8’s. Organizations are also responsible for verifying that vendors are not included on databases, like the OFAC/SDN list, as companies, organizations or individuals that are prohibited by the U.S. government from doing business with U.S. companies.

Current regulatory law requires any U.S. organization issuing U.S. source income payments to vendors to properly obtain the tax identification number (TIN) and legally related name from each payee along with their tax status — individual, corporation, LLC, LLP, partnership or other designation. In many cases, depending on the type of payment, the payer is required to obtain a certified copy of a Form W-9 from a U.S. Payee or a Form W-8 from a foreign payee.

Failure to obtain the TIN, legal name and status places the payer in the position of being required to withhold federal tax and possibly state withholding tax from each payment.

Obtaining accurate Employer Identification Numbers, names, and addresses from vendors enables accurate 1099’s to be sent to the IRS at filing time. Inaccurate 1099’s, i.e., those that do not match with the information in the IRS database, result in discrepancies that generate B-notices from the IRS. B-notices are your notification to correct the error and re-file or provide the IRS with an explanation as to why the error cannot be corrected. Correcting errors incurs the cost of research time, while failure to correct errors can result in fines and penalties that continue to increase.

OFAC/SDN

The Treasury Department enforces regulations that prohibit doing business with companies that are on specific lists. One of these lists is the Specially Designated Nationals, or SDN, compiled by the Office of Foreign Assets Control. All vendors should be checked against the SDN database.

As defined by the Treasury Department, “the Office of Foreign Assets Control administers and enforces economic sanction programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals… Prohibited transactions are trade or financial transactions and other dealings in which U.S. persons may not engage unless authorized by OFAC or expressly exempted by statute… As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called ‘Specially Designated Nationals’ or ‘SDNs.’ Their assets are blocked and U.S. persons are generally prohibited from dealing with them.”

Often, these companies and individuals have names that do not sound dangerous. Fines for engaging in prohibited transactions are substantial, reaching hundreds of millions, even billions of dollars.

There are also other lists to check against depending on your industry, including the Excluded Individuals and Entities and U.S. Post Office Address Validation; please contact us if you would like a more extensive explanation or list of them.

Many of the steps involved in verifying vendors and validating the accuracy of vendor information can be automated with a vendor self-service portal. Using the portal reduces onboarding costs, improves the accuracy of the vendor master file, and protects against non-compliance and associated penalties.

Learn how InvoiceInfo helps companies and non-profits verify their vendors against OFAC and other critical lists. Call (678) 335-5735 today or request more information.



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Service and Increase Profit!

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If you are like many finance leaders today, you are being challenged to reduce costs more quickly. InvoiceInfo delivers real bottom-line results almost immediately, allowing you to deploy your customer service staff to focus on more productive, bottom-line oriented tasks.

Let us show you how InvoiceInfo's vendor self-service portal can help your organization eliminate invoice inquiry emails and calls while enhancing service to your accounts payable customers.

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InvoiceInfo and VendorInfo are standalone applications that can be up and running in as little as two weeks, with little or no IT resources required.

The faster your online portal is up and running, the sooner you will start reaping the benefits. InvoiceInfo and VendorInfo are dedicated solely to helping AP and procurement departments slash the time and expense of servicing vendors, while improving customer service for their suppliers.

InvoiceInfo and VendorInfo are simple solutions with big results. They are easy to implement and easy to use. Here’s how one customer described the process: “You give vendors a URL, provide instructions about what they need to know and tell them to go use it.” It really is that easy.

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Improve Productivity with a Self-Service Solution

For most organizations, deploying a technology solution is a significant investment, and like most investments, the decision point ultimately comes down to the expected return on that investment.

According to a recent benchmark study by The Accounts Payable Network, 60% of AP customer service calls are from vendors while 40% are from internal customers. Vendor issues actually make up even more of the AP call volume than the 60% identified. Many times when a vendor has an issue, the vendor contacts their buyer or purchasing representative, who in turn contacts AP. Even though the call comes from an internal customer, the question originated with the vendor.

Vendor calls affect productivity in your organization exponentially. When vendors call the requisitioner, they are affecting that person’s productivity. Your internal customer’s productivity shrinks when fielding the vendor’s call and again when making the follow up call to AP and getting back to the vendor. Finally, AP’s productivity suffers as a result of the internal customer’s call, the payment status research and the follow-up communication.

With a minimal investment of IT time and talent, you can start reducing customer service calls and expense in a matter of weeks. In addition, you improve vendor relations since you are giving your vendors what they want — answers to their questions immediately — a win-win for everyone involved!

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Easy and Economical Solution to Serve Vendors Around the World

InvoiceInfo can help you provide best-in-class customer service to your vendors around the world at a fraction of the cost.

Many organizations today have offices and operations throughout the world and are dealing with many time zones, different languages, and in some cases multiple ERP systems. InvoiceInfo currently supports different languages and can easily work with multiple ERP systems in different locations.

The key to good customer service is to provide the information that the customer wants when they want it. Whether your customer is a vendor waiting for a payment or a colleague that needs information on payment status, they want their information right away. If your organization has vendors and offices in other countries, they can be challenging and expensive to serve. But, with InvoiceInfo, your international vendors and internal customers can access the information they need when they need it.

With InvoiceInfo, you won’t have to staff your customer service team with 24-hour coverage in multiple languages to provide high-quality customer service around the world.

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Enhance AP’s Role As a Strategic Partner

Learn how InvoiceInfo can help AP do more with less while continuously improving productivity and bottom-line results.

Many automation technologies such as scanning, workflow, e-invoicing, ACH, and electronic invoicing require significant investments of money, time and talent, making it difficult to get buy-in from upper management. Not InvoiceInfo!

If your goal for your AP department is to reduce costs quickly, call or email us today to learn more about how InvoiceInfo can help you achieve this goal through a quick, inexpensive and easy implementation of a vendor self-service portal.

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Enhance Vendor Relationships

InvoiceInfo helps suppliers’ AR departments with simple and convenient access to invoice payment status online at a cost savings for all involved.

It may seem that the organization paying the vendor should hold all the cards in the relationship. But sometimes the opposite is true. Past-due payments and customer service perceptions can harm supplier relationships and disrupt the supply chain.

Your vendors and vendor relationship managers are living in a dynamic, fast-paced environment, so when invoice information is required, it is needed quickly and expected to be of high quality. With InvoiceInfo, your suppliers get answers to invoice inquiries real time, 24/7 with no need to leave messages and wait for responses. Studies show that confidence in data increases when suppliers access invoice and payment information themselves.

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Give Procurement and Buyers the Tool They
Need to Respond to Vendors Quickly

Not only can InvoiceInfo be used by suppliers to learn the status of invoice payments, it can also be used internally within your organization.

In addition to reducing calls from vendors regarding invoice status, you can also reduce internal emails and calls from co-workers wanting to learn the status of invoice payment, and save time and effort and boost efficiency and productivity across the organization. Studies show that 40% of AP customer service calls are from internal customers. Many of these are from requisitioners who have received calls or emails from the supplier checking on payment status. These calls are often more expensive for the company because the internal staff member has taken the call or received an email from the supplier, contacted AP for the payment status and had to return the call or email the supplier.

By providing the vendor with a convenient and credible online option to get the answers it needs regarding payment status, you can eliminate multiple calls/emails between the vendor and the requisitioner saving time and money.

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Eliminate Difficult Vendor Calls and See
Productivity and Staff Morale Soar

Reduce invoice payment inquiries and “promote” your vendor service team to more satisfying and profit-producing tasks.

By sharply reducing inbound calls and emails regarding receipt and payment status that your AP staff must handle individually, your staff can focus their efforts on more productive, cost-saving activities, learn new tasks, feel more confident and boost their careers.

According to a recent American Express survey on customer service, more than one-third of consumers have lost their temper with a customer service professional in the past year. Of those who lost their temper, three in ten “hung up the phone.” Your staff will no longer have to deal with difficult collectors who can be upsetting and disruptive. Your staff will feel that their time and talents are being put to better use and will feel better about themselves, their jobs and their organization. Reducing these calls can be a real productivity and morale booster for your AP department!

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Simplify and Streamline Vendor Onboarding

According to Price Waterhouse Coopers, the average organization spends about $20 in labor to file each paper document, approximately $120 in labor searching for each misfiled document and $220 in re-creation of a document.

Wouldn’t it be great to have all your W-9’s, W-8’s and other registration documents completed online and instantly filed online for easy access when needed? With Vendor Self-Service Onboarding Module, VendorInfo, you can onboard your new vendors in one convenient location and eliminate paperwork and hassles.

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Verify the Accuracy of Vendor Information and Stay in Compliance with IRS and Treasury Department Regulations

Government regulators are increasing the complexity of regulations and penalties associated with vendor-related non-compliance.

Penalties for incorrect 1099’s have more than doubled in recent years. Over the last several years, OFAC has levied more than $1 billion in fines against American companies or subsidiaries that did business with restricted businesses, organizations and individuals on its SDN list. In addition to fining these companies, the Treasury Department posts the names of infringing organizations along with fines paid.

VendorInfo Onboarding Module verifies the accuracy of vendor information and helps protect your organization by avoiding embarrassing penalties and fines.

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