Poorly vetted vendor records can mask fraudulent companies and a host of other risks—leaving you open to losses and fines. Among the proof points: 84 percent of executives surveyed for the Kroll Global Fraud and Risk Report said their company fell victim to at least one instance of fraud in the past 12 months and nearly one in four said their fraud losses totaled 7 percent or more of revenues. About a third said that the primary perpetrator was a vendor.

But fraud isn’t the only supplier risk companies face. Here is just one real-world example. When a well-known specialty biopharmaceutical company decided to analyze its vendor master data, experts discovered that 82 of the firm’s vendors appeared on “prohibited entity” lists. Since the fine for a single Office of Foreign Assets Control (OFAC) violation in the US can exceed $1 million, it’s easy to understand the magnitude of the global financial risk. Auditors also found nearly 6,000 vendors with incorrect tax identification numbers—risking B-Notice violations and additional global fines and penalties.

2. A Reduction in Duplicate Payments

Recovery audit experts at apexanalytix say nearly 30 percent of the duplicate payments they uncover are triggered by vendor master errors, including coding mistakes, multiple records for the same firm and inconsistent data entry. The risks can be especially high if you experience an influx of new data from a merger or an acquisition.

You may think your ERP controls will back you up and prevent duplicate payments triggered by vendor master errors. But don’t be fooled. The experiences of a global research and manufacturing company prove the point. When the firm adopted new accounts payable software specifically designed to protect disbursements, they uncovered thousands of historical duplicate payments—errors that were missed by the company’s ERP platform. Their new controls also helped them proactively prevent more than $134 million in duplicate payments over a three-year period.

3. Better-Informed Decisions

The information you capture in your vendor master can be an important tool for decision making and for powering strategic initiatives that benefit your bottom line. It can help you produce a wide range of insightful reports and analytics—from vendor and invoice stratification to days payable outstanding. You can use the information to help you manage spending, improve working capital, negotiate better contract terms and monitor compliance with both government regulations and internal controls.

If your vendor records contain errors and omissions, though, it can impact your efforts to understand your current state and to launch successful new strategies. That was the issue faced by a safety certification testing firm with operations in more than 100 countries around the globe. Company executives wanted to make fundamental changes in how they dealt with suppliers—increasing the use of purchase orders and contracts, standardizing on more advantageous payment terms, automating key procurement and payment processes and reducing calls to the company’s accounts payable help desk.

As a first step, they knew they needed to assess the quality of the supplier data held in more than two dozen corporate systems and databases. They used newly available AI-enabled vendor master cleansing software to review more than 35,000 supplier records. The software uncovered and remediated a wide range of issues:

• Nearly 1,000 duplicate supplier records
• More than 1,200 inactive suppliers
• 5,700 suppliers with invalid banking information
• Nearly 700 invalid tax identification numbers
• More than 6,000 missing SIC/NAISC codes
• Nearly 100 suppliers plagued by negative publicity
• 15,000 incorrect addresses
• 2,000-plus records without current phone numbers and email addresses

Once the cleanup process was complete, the company had a solid foundation for the new initiatives it wanted to launch to improve profitability—including suppler segmentation, strategic sourcing and development of preferred relationships. “We now know if we’re using the same supplier across multiple countries so we can combine our purchasing power,” the company’s finance transformation director says.

Despite the Powerful Benefits of a Clean, Rich Vendor Master, Most Companies’ Vendor Records Are Riddled with Gaps and Errors

When apexanalytix partnered with Shared Services Link to survey leaders of Global 2000 shared services about their vendor master data, we discovered that the issues are pervasive. And they typically begin at the time of supplier onboarding.

Nearly 90 percent of the executives surveyed use manual registration processes that are prone to gaps and errors, while nearly 40 percent even lack a standard form for collecting data at the point of registration—leaving them open to unauthorized vendor relationships, maverick spending and a host of compliance issues.

When we probed further and asked the same global executives about their vendor master management challenges, they identified six factors that keep them from establishing and maintaining a clean vendor master.

Technology Simplifies Vendor Master Management

Today there are new vendor master cleansing and monitoring technologies that can help you mitigate risks and reap the financial benefits of a clean vendor master. You can eliminate errors, close information gaps and actually improve your supplier records over time.

The best solutions leverage big data analysis, artificial intelligence, predictive analytics, robotic process automation and trusted external data sources to make vendor master management simple, seamless, touchless and compliant.

apexanalytix recommends a three-layer protection framework. “Get your house in order” by scrubbing your vendor data so it is in pristine condition. “Guard your front door” by ensuring each new record or change to an existing record is error-free. And “guard the back door” by continuously monitoring for changes in vendor status, regulatory issues and fraud risks. Here are a few powerful examples of what you can do better and faster with vendor master cleansing and management technologies:

• Scrub and Validate. To build that strong foundation you need, you can uncover and purge duplicate records, standardize addresses and phone numbers based on various global criteria, and automatically validate addresses, tax identification numbers and banking information for accuracy. It couldn’t be easier.
• Enrich and Classify. You can compare each field in your vendor master to billions of records from hundreds of global government, regulatory and third-party data sources—including millions of scored “golden records” for suppliers to the Global 2000. You can automatically locate missing contact names, phone numbers, email addresses, mailing addresses, DUNS numbers, parent-child relationships, SIC/NAIC codes and diversity ownership status. You’ll have richer records with important data you need to power strategic initiatives.
• Analyze and Alert. To protect against costly losses and fines, you get immediate alerts if any of your suppliers are on government watch lists. And you can make certain that new suppliers who represent an unreasonable risk will never be added to your vendor master.
• Continuously Protect. Once your vendor master has been thoroughly cleaned, vetted and updated, built-in robotic process automation helps you keep it that way. Your software continuously monitors and improves your supplier database by notifying you when suppliers hit government watch lists, go out of business, change addresses, add new industry codes, add or change points of contact—and more. You can rest assured you have the most up-to-date vendor records available at all times.

To Find Out More

It is clear that maintaining a clean vendor master makes good business sense. When you adopt the right vendor master management solution, you can reduce your duplicate payment exposure, uncover fraud and other supplier risks, improve the accuracy of your spend analytics, make better-informed business decisions and boost your bottom line.