ten tips to ensue that your suppliers are real
DESCRIPTION
Ten Tips to Ensue that Your Suppliers are RealTRANSCRIPT
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Ten Tips to Ensure that Your Suppliers are Real
Hi, thanks for joining us! We will begin the webcast shortly but in the meantime, please keep in mind: • Enter your questions and comments in the chat box, there
will be time at the end of the webinar for Q&A • Presentation and recording will be sent afterwards
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Chris Doxy Senior finance and controller positions at Digital Equipment Corporation, Compaq Computer Corporation, Hewlett Packard, MCI, APEX Analytix, and BSI Healthcare. Expertise in compliance, auditing, internal controls, and fraud prevention. Chris also serves as the Executive Director of the Controller Certification Program for the IOFM. Authored - The Controller’s Best Practices Guide, The Controller’s Best Practices Guide to the Financial Close, AP Leadership Skills and Implementing a Controls Self Assessment Program for Accounts Payable
Vishal Patel Sr. Marketing Manager at Tradeshift. Former industry analyst (Ardent Partners, Aberdeen Group), with many years of experience researching, benchmarking and advising enterprises on their AP and P2P strategies. Deep understanding of the technology soluCons in this space and how they can help to improve performance.
@VishalP_
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Agenda
§ Why Protecting your Supplier Master File is Critical
§ An Overview of the Supplier Validation Process
§ Implementing your Supplier Validation Process
– For New Suppliers
– For Current Suppliers
§ Ten Tips to Ensure that Your Suppliers are Real
§ Tradeshift Overview
§ Q&A
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Learning Objectives
§ Learn about the 10 Tips to Ensure your Suppliers Are Real.
§ Learn about the Fraud Risk Analysis (FRA) process for your supplier master.
§ Review the Red Flags for Purchase to Pay Fraud.
§ Understand how technology solutions can help manage your supplier master.
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R 161 G 161 B 161 Protecting Your Supplier
Master
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Why Protecting your Supplier Master File is Critical
The Procure to Pay (P2P) cycle is fundamental to the profitability of an organization, especially in economically challenging times.
Source: KPMG
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Why Protecting your Supplier Master File is Critical
According to the ACFE "2014 Report to the Nations on Occupational Fraud": § Fraud is ubiquitous; it does not discriminate in its
occurrence. And while anti-fraud controls can effectively reduce the likelihood and potential impact of fraud, the truth is that no entity is immune to this threat.
§ Of these, asset misappropriations are the most common, occurring in 85% of the cases in our study, as well as the least costly, causing a median loss of $130,000.
§ Corruption schemes fell in the middle in terms of both frequency (37% of cases) and median loss ($200,000).
Source: 2014 ACFE Report to the Nations
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Frequency of Fraud Cases: Purchasing and Finance
Source: 2014 ACFE Report to the Nations
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R 161 G 161 B 161 Supplier Validation Process
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Percentage of Emphasis on Supplier Validation in the Supplier Management Lifecycle
0%
5%
10%
15%
20%
25%
30%
35%
1. Qualification
2. Sourcing 3. Onboarding
4. Doing Business
5. Managing Performance
6. Probation or Exit
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R 161 G 161 B 161 Ten Tips to Ensure that Your
Suppliers are Real
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Best Practices for Supplier Management Compliance
Qualification • Establish a Supplier Qualification Process
Sourcing
• Request for Proposal (RFP) and Request for Information (RFI) • Utilize an Objective Supplier Evaluation and Selection Process
Onboarding – Is the Supplier Real?
• Obtain a W-9 form for domestic suppliers and a form W-8 for foreign suppliers
• Perform Initial TIN Matching and Take Action for Incorrect TINs • Review the Supplier Profile and Contact Information • Initial Validation of the Supplier – What to look for • Perform Initial Compliance Screening
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Best Practices for Supplier Management Compliance Doing Business – Is the Supplier Still Real?
• Perform Ongoing Compliance Screening • Complete a Comparison of Your Employee and Supplier Master • Complete TIN Matching for your Supplier Master at Least Annually • Complete a Supplier Fraud Risk Analysis (FRA) • Fine Tune Your Supplier Master Annually
Managing Performance
• Establish Supplier Service Level Agreement Reviews Probation or Exit
• Supplier Performance Continuous Monitoring • Watch for Compliance Issues
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1. Obtain a W-‐9 form for domesCc suppliers and a form W-‐8 for foreign suppliers
2. Perform IniCal TIN Matching and Take AcCon for Incorrect TINs
3. Review the Supplier Profile and Contact InformaCon
4. IniCal ValidaCon of the Supplier
5. Perform IniCal Compliance Screening
10 Tips to Ensure that Your Suppliers Are Real Initial Supplier Validation
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10 Tips to Ensure that Your Suppliers Are Real Doing Business
6. Perform Ongoing Compliance Screening
7. Complete a Comparison of Your Employee and Supplier Master
8. Complete TIN Matching for your Supplier Master
9. Complete a Supplier Fraud Risk Analysis (FRA)
10. Fine Tune Your Supplier Master Annually
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1. Obtain a W-‐9 and W-‐8 Forms For All New Suppliers
Use Form W-9 only for U.S. Suppliers (including a resident alien), to provide correct TIN to the person requesting it (the requester) and, when applicable, to:
1. Certify that the TIN provided is correct (or the supplier is waiting for a number to be issued)
2. Certify that the supplier is not subject to backup withholding
www.irs.gov/pub/irs-pdf/fw9.pdf
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2. Perform Ini@al TIN Matching and Take Ac@on for Missing or Invalid TINs
§ The National Taxpayer Advocate has also recommended that all payees be required to certify their TINs (i.e., through use of Forms W-9 signed under penalty of perjury).
§ The TIN Matching service is available at no cost
§ TINs can be validated either in an interactive session or by the bulk uploading process.
http://www.irs.gov/Tax-Professionals/e-services---Online-Tools-for-Tax-Professionals
www.irs.gov/pub/irs-pdf/p2108a.pdf
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3. Review the Supplier Profile and Contact Informa@on
§ Ensure all supplier information is complete and reasonable
§ The Supplier Profile Form can be a component of the qualification process and can be used with major suppliers as part of the supplier clean up process
Supplier Profile Form Business Name/Taxpayer Name (Exact Legal Name):
Federal ID Number/Social Security Number: Parent Company (if applicable): □ Domestic □ Foreign Business Type: Officers: q Corporation Principal/Owner: q Partnership Chief Executive/President: q Sole Proprietorship CFO/Controller: q Individual Contact Name for Negotiations: Telephone:
E-mail: Contact Name for Billing Inquiries: Telephone: E-mail:
Primary Remittance Address: Physical Business Address: Address 1: Address 1: Address 2: Address 2: City: State: Zip: City: State: Zip: Telephone Number: Fax Number: Company Website (if applicable):
Please attach at least three of the following: Proof of Existence: ο - Corporate Charter ο - Federal Tax Return ο - Recent Audited Annual Report ο - Vendor Contract/Agreement ο - City/County Business License ο - Product Catalog ο - Sales Tax Certificate ο - 1099 ο - IRS Document/Notice ο - W-9 Description of Business (or commodity code, i.e. SIC, NAICS, etc.):
Please check techniques you are currently using with your customers: q Evaluated Receipts Settlement (ERS) q Electronic Data Interchange (EDI) q Electronic Funds Transfer (EFT) q On-line Pricing Catalog How would you like to receive payments? □ ACH □ Wire □ Check □ Other ____________________ I hereby certify, under the penalty of perjury, that to the best of my knowledge, the information presented here is true and correct. Respondent’s Name:
Respondent’s Signature:
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4. Perform the Ini@al Screening – What to Look For
§ Valid and complete supplier website
§ Address provided is reasonable
§ Review suppliers operating out of the same address
§ Determine if another supplier has the same TIN number
§ Determine if your company has any past or present legal actions with the supplier
§ Determine the validity of the corporation by reviewing state of incorporation data
§ Review Better Business Bureau data
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5. Perform Ini@al Compliance Screening
Periodically screen your supplier master file against the compliance requirements applicable to your industry.
§ OFAC – Office of Foreign Asset Control
§ BIS - Bureau of Industry and Security
§ SAM/EPLS – System of Award Management (SAM) which includes the Excluded Parties List System (EPLS)
§ SDNs - Specially Designated Nationals are considered enemies of the United States. OIG – Office of Inspector General (Healthcare)
§ FCPA – Check Politically Exposed Persons (PEP) Listings
http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx
http://www.bis.doc.gov/
https://oig.hhs.gov/
https://www.sam.gov/portal/SAM/#1
http://www.accuity.com/compliance/pep-due-diligence-database/?cmpid=PSC|BAML|BAML-2014-GLOB-adwd-pep&sfid=701D0000000KzwY&gclid=CNOu_bf9xb8CFUIQ7Aod3lAAYw
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6. Perform Ongoing Compliance Screening
§ Basic screening should include comparing supplier master records the compliance requirements applicable to your industry.
§ Quarterly screening using a compliance solution is a recommended best practice.
§ Supplier master screening should be included in your P2P internal controls program with defined roles and responsibilities for procedures for due diligence.
http://www.treasury.gov/about/organizational-structure/offices/Pages/Office-of-Foreign-Assets-Control.aspx
http://www.bis.doc.gov/
https://oig.hhs.gov/
https://www.sam.gov/portal/SAM/#1
http://www.accuity.com/compliance/pep-due-diligence-database/?cmpid=PSC|BAML|BAML-2014-GLOB-adwd-pep&sfid=701D0000000KzwY&gclid=CNOu_bf9xb8CFUIQ7Aod3lAAYw
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7. Complete a Comparison of Your Employee Master Against Your Supplier Master
§ Complete the comparison at least annually § Compare the following:
– Name • Exact Match
• Last Name
– Address
– TIN, EIN, and SSN
– Bank Account
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8. Complete TIN Matching for your Supplier Master at Least Annually
§ Use the Bulk Upload capability to complete TIN Matching for your supplier master file.
§ Your supplier master file must be submitted in the IRS format using your e-services account.
§ Results are provided in a secure mailbox within 1-2 business days.
§ This process will help to alleviate B-Notices resulting from incorrect TINs provided on 1099s issued.
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9. Complete a Supplier Fraud Risk Analysis (FRA)
What is an FRA? § An FRA considers vulnerability to management overrides and potential
schemes to circumvent existing control activities such as segregation of duties and delegation of automation
§ A review of supplier data and payment history highlights anomalies, duplicate payments, pricing discrepancies, and payment issues.
Objectives of an FRA are to: 1. Identify the vulnerabilities for fraud, and
2. Implement proactive measures such as specific internal controls to prevent the fraud from occurring.
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The three phases of an FRA include: 1) Access - The current internal controls structure and identifies specific
weaknesses where potential fraud schemes could occur.
2) Respond - Fraud risks are linked to controls to determine: risk tolerance, cost benefit analysis, stakeholder expectations, and remediation monitoring.
3) Sustain - A report is developed to communicate the results of the FRA process, the fraud audit plan is developed and executed, and a continuous monitoring process in implemented.
9. Complete a Supplier Fraud Risk Analysis (FRA) -‐ Cont
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Purchase to Pay (P2P) Fraud Flags
§ Poor segregation of duties throughout the P2P process § Round dollar value invoices § First invoice is for a low dollar amount followed by larger dollar
invoices § Lack of control around the bidding process including poor
documentation, absence of appropriate competition § Poor documentation of expenditures or failure to complete a match of
invoices to receiving and order documentation § Consistent use of a supplier who is delivering poor quality goods,
particularly where this issue is concentrated with one buyer § Duplicate invoice payments
Source: Best Practices and KPMG
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Purchase to Pay (P2P) Fraud Flags (Continued)
§ Excessive entertaining of procurement staff by suppliers § Suppliers with a post office box as the sole address § Absence of a legitimate TIN Number § Off-hour transactions § Out-of-sequence invoice numbers for a particular supplier § Payments to inactive suppliers § Low initial bids followed by excessive change orders § Poor cash management practices (i.e., paying invoices right away
despite the accepted practice of 30 to 60 day payment terms in a particular industry)
§ Checks set aside for special handling
Source: Best Practices and KPMG
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10. Fine Tune Your Supplier Master on an Annual Basis
§ Use Supplier Coding Standards to ensure data
consistency within your Supplier Master that include business rules for: – Supplier Name, Address, Phone Number, and Contact Information.
§ Identify possible duplicate suppliers.
§ Identify suppliers with multiple addresses and consolidate when possible.
§ Block or purge suppliers with no activity within 18 months.
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Recap - Learning Objectives
§ Learn about the Ten Tips to Ensure your Suppliers Are Real.
§ Discuss how non-compliance can put your company at significant risk if your suppliers are not initially validated and reviewed on an ongoing basis.
§ Learn about the Fraud Risk Analysis (FRA) process for your supplier master.
§ Review the Red Flags for Purchase to Pay Fraud.
§ Understand how technology solutions can help manage your supplier master.
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Tradeshift Overview
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▪ Flexible cloud platform enabling businesses to connect, collaborate and transact with their supply chain
▪ State-of-the art automation, data intelligence and collaboration technology that is cloud based, mobile ready, and simple to use
▪ Our mission is to help businesses and their employees connect to and create value for their entire supply chain
• Over 500,000 suppliers in over 100 countries
• 5 million suppliers connected through pla]orm partners such as Intuit
• Fastest growing B2B pla]orm in the world today with more than 2000 suppliers joining every week
About Tradeshift
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Tradeshift’s Open Platform Approach
TRADESHIFT PLATFORM
Document Transmission, Statuses, Messages, Integration, Security, API
Supplier
Buyer
Order Management
Electronic Invoicing
Business Firewall
CloudScan® (Paper/PDF)
Collaborative Workflow
Financial Solutions
Build Your Own App
Supplier Management
Ability to expand functionality as needed
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Global Customers
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Tradeshift’s value proposition
Supplier Buyer
Communicate & collaborate directly with your buyers.
Lower costs for your entire supply chain. Manage and track POs, invoices, and more.
Connect via web, integration or any accounting software.
Free. No supplier fees. Ever.
Communicate and collaborate with suppliers.
Innovate past invoicing on top of an open platform.
One platform for all your business needs.
Reduce cost and friction for your entire supply chain.
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Questions
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Speaker Contact Information
Chris Doxey, CAPP, CCSA, CICA, CPC
Subject Matter Expert and Management Consultant
571-267-9107
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Ten Tips to Ensure that Your Suppliers are Real
Thanks for joining us! • Register for our next webinar on Supplier Responsibility
August 20, 2014. • Stay relevant, visit blog.tradeshift.com • Presentation and recording will be sent afterwards