Two Ways to Avoid Vendor Fraud

As a business owner or non-profit leader, you can’t do everything and you usually don’t have the budget to hire employees with the right skills. Outsourcing to a vendor on an “as needed” basis is often the answer. Help is great but is has to be the right help. So how do you protect your organization from the wrong vendor, especially one who is unscrupulous, and can cost you time, money and reputation? Do your homework and pay attention.

The concept of “set it and forget it” might work sometimes for cooking, but it doesn’t work for outsourcing to vendors. Not paying attention to a vendor relationship once the agreement is signed signals that you might not be looking at his or her invoices or performance. Lack of oversight can be tempting for vendors who are experiencing financial or workforce stresses to cut corners (or pad expenses) on your account.
Getting fleeced when you need help is a double whammy. Technically, it’s vendor fraud. The two main ways that organizations can avoid vendor fraud are:

  1. Do Your Homework

Research the backgrounds of companies bidding on your work to verify ownership and qualifications, including key employees. References are great but don’t hesitate to dig in to learn for yourself. Request, obtain and review related documentation.
Conduct face-to-face meetings with the vendor to ensure they are valid, licensed, have real employees, etc. Also check your organization’s contracting procedures and vendor records to avoid engaging a vendor or his/her affiliate that did not perform well for your organization in the past.

  1. Pay Attention

Monitor vendor performance for quality, completeness, and timeliness of expected work and its documentation, based on your written agreement. Inspect or review work periodically and require interim progress reporting.

Verify invoices against the written agreement to avoid and detect duplicate, overbilled, and other fraudulent practices. Require support documentation to substantiate the invoice. Don’t overlook lower priced, repeating items. These small-dollar items are often dismissed as not worth the review time, which presents an opportunity for vendor fraud.
Doing your homework and paying attention cost time and money. But all that could be a lot less expensive than engaging an unscrupulous vendor who costs your organization its time, money and reputation. Even better, engaging the right vendor will meet your needs and expand your opportunities.