Most businesses work with a wide variety of vendors: some great, some good, and some who may attempt to defraud your company. How can you make sure you're not the victim of vendor fraud?
It starts with building a good relationship with your vendors. Building a good relationship not only helps you avoid fraud or for your vendors, to be tempted to commit fraud but also could benefit your business in other ways, creating the classic win-win situation.
Your goal should be to build strong vendor alliances that create mutually-beneficial partnerships. So let's start with the basics of building that relationship; then we'll focus on further ways you can detect and avoid fraud.
Work together. Vendor relationships don't have to be adversarial. The best are based on clearly defined expectations, guidelines, and structures. Start by letting your vendor know what to expect in terms of quality, communication, delivery schedules, etc. Also let your vendor know what documents you expect to receive from them especially documents that will help you avoid potential fraud. For example, you may require a specific type of packing list or other shipping documents that help you more easily verify the type and quantity of the goods you receive.
You can earn respect and start to build trust up-front by asking the right questions and providing clear expectations. If your vendors see you as a valued, long-term partner, they will be much less likely to take advantage of you.
Be honest. You create trust through honesty. If you deceive your vendors why shouldn't they consider deceiving you?
Respect the vendor's right to make a profit. You're in business to make a reasonable profit and so are your vendors. While you should always try to get a great price, don't expect your vendors to take a loss for the "privilege" of earning your business. Cut margins to the bone and vendors might be tempted to find ways to artificially increase those margins: reducing quality, short-shipping, making late deliveries, over-invoicing. Treat others the way you wish to be treated. Mutually beneficial pricing will create sustainable and profitable partnerships.
Ask for their help. Your vendors often know a lot about your business, and can suggest ways to not only improve how you work together but also improve your business as a whole. If you're concerned about what information you might share, have your vendors sign a non-disclosure agreement first. Again, treat vendors with respect and they will be much more likely to respect you in return.
A good vendor relationship is built on honesty and trust but trust is often based on verification. To confirm your vendors and your employees are on the up-and-up, here are some basic steps you should take:
The information provided is not intended to be legal, tax, or financial advice or recommendations for any specific individual, business, or circumstance. TowneBank cannot guarantee that it is accurate, up to date, or appropriate for your situation. Financial calculators are provided for illustrative purposes only. You are encouraged to consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.