Supplier fraud remains a key area of exposure and one that finance teams could stop by using accurate supplier information. In practice, though, this information is notoriously outdated.
The department most often responsible for managing supplier information, procurement, works closely with finance. Yet, the situation has persisted for years. Why? Addressing it is seen as a mammoth task that neither team is rushing to tackle.
Meanwhile, businesses are losing money. It’s time, therefore, to close this gap in defences. Here are five steps for finance and procurement can take to address the information struggle for good.
Fraudsters, like hackers, continuously look for weaknesses to exploit, 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.
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.
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.
With a system established for capturing new supplier information, next, the resulting data must be protected from unauthorised amendments. Fresh entries are likely to change quickly, making data obsolete.
There must be no weak spots for fraudsters to exploit so, at this stage, data governance is important. The next step, therefore, is adding a process to support data changes, with all the necessary checks and balances – for example, running workflows from purchase requests through to invoice matching, building legitimate communication channels, and establishing robust ways for people to edit supplier data and change invoices.
The final step to securing 100% accuracy is to funnel all data through a single front door and 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.
Costas Xyloyiannis is co-founder and CEO of HICX, a supplier experience management solution