The document provides 10 tips for ensuring suppliers are real, including obtaining W-9 and W-8 forms, performing initial TIN matching and validation of supplier information, initial and ongoing compliance screening, comparing employee and supplier data, and conducting an annual supplier fraud risk analysis. It emphasizes the importance of protecting the supplier master file due to the risk of purchasing and finance fraud.

1. Ten Tips to Ensure that Your
Suppliers are Real
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2. 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_

3. 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

4. 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.

5. Protecting Your Supplier
Master

6. 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

7. 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

8. Frequency of Fraud Cases: Purchasing and
Finance
Source: 2014 ACFE Report to the Nations

9. Supplier Validation Process

10. 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
10

11. Ten Tips to Ensure that Your
Suppliers are Real

12. 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

13. 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

14. 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

15. 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
15

16. 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

17. 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

18. 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:

19. 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

20. 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

21. 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

22. 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

23. 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.

24. 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.

25. 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

26. 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

27. 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

28. 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.

29. 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.

30. Tradeshift Overview

31. ▪ 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

33. 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

34. Global Customers

35. 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.

36. Live Demo

37. Questions

38. Speaker Contact Information
Chris Doxey, CAPP, CCSA, CICA, CPC
Subject Matter Expert and Management Consultant
chris@chrisdoxey.com
571-267-9107

39. Ten Tips to Ensure that Your
Suppliers are Real
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August 20, 2014.
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