How 3 simple vendor checks helped me avoid fraud


Some of us evaluate a vendor before entering into a transaction. Some of us don’t. Many times it is difficult to get any useful information on that vendor. Things work by word of mouth until they go bad. Broadly speaking, vendor onboarding is the process of verifying and assessing a vendor/supplier to suit your organization’s eligibility requirements. Why is it ever done? You would know why, if, you have ever faced a vendor fraud. If you haven’t yet, may be my recent experience will help you understand.

My story:
I recently shifted to Bombay to set up next Tofler’s office. I was searching for suppliers that could help transit some stuff. Aggarwal Packers and Movers was definitely an option but was turning out expensive.

So, after looking at alternatives in Google, I nearly finalised a deal with one company. It had an impresive website, quick response time and happy reviews. Before going ahead, I ran up 3 simple checks on the company:

  1. Incorporation date: The company was incorporated 2 years back. Now that was a bit of a red flag. Mouthshut had some 1500 reviews on the company. How could there be 1500 reviews in 2 years of starting up? Other similar companies had about 400-500 reviews and they started much earlier.
  2. Registration details: Looked at the company’s address, charges, capital etc – nothing alarming. All details matched with that on website and as communicated by the compant to me.
  3. Directors and other directorships:  Then I started looking at directors of the company and their other directorships. This is where the problem appeared. The directors of this logistics vendor had directorships in 50 other companies. Most of the companies were ‘strike off’. Most of them were recently incorporated and then shut down. Of those which were ‘Active’ companies, many of them were non-compliant and hadn’t filed recent financials. This definitely doesn’t say right about the supplier. Questions the integrity and fraudulent intention. Wouldn’t you agree? Then the reason for so many mouthshut reviews clicked me – they were all fake and bought reviews! And that’s why they all said good about the company.

The point being
This ofcourse is a small example of how simple checks on a business could help. But my point is that even in such a small transaction, it was helpful. Then why miss it in a bigger transaction? I have often come across suspicious businesses that could be discovered by an apparent look. The problem is that we don’t look at all.

Just start with a basic process – Look at registration details, financial highlights, directors and connected companies. This could go a long way to save trouble in the future.