Vendor Vetting: 11 Actionable Safety Tips
If you are dealing with import/export trade, your vendors abroad are your most important asset. Unreliable vendors can disrupt your whole operation and cause losses. Vendor vetting should be a top priority as an entrepreneur. After all, the non-delivery crime in cross-border B2B transactions had over 61,000 victims in 2019 alone.
If you are an exporter, vetting your buyers is equally important. Overpayment, advanced fees and credit card fraud are just some of the common tricks that scammers posing as reputable buyers have used to cause hundreds of millions in damages.
It’s essential to run proper background checks on your suppliers and buyers using specialized services. However, there are also some common sense tips that you can implement on your own.
Below is a list of actionable tips for selecting and vetting your vendors, preventing you from making mistakes that others have made before you.
1. Have a vendor vetting policy.
Have a specific set of requirements vendors need to meet. Make sure you establish rules and stick to them. Have a policy, even if it’s just a couple of points. In other words, know what you want and have procedures to get it.
A non-disclosure agreement (NDA) is also a good idea, both for importers and exporters. If your business idea is sensitive, ask your partners to sign an NDA to show their good will and establish trust.
A lot of entrepreneurs get this wrong when they make exceptions for vendors that don’t meet all the requirements but are persuasive enough to evoke trust. Things often go wrong as a result, leading not only to disappointment but potential business loss.
2. Inspect the documents
First things first, make sure you are dealing with a licensed and registered business. Get a copy of all its business licenses and check its standing online.
Make sure all proforma invoices, bills of lading, customs and export certificates are in place and have the same information across all of them. Very often there are suspicious consignees, different goods amounts, dates, and other discrepancies that you need to sort out before you work with the vendor.
Customs invoices are also extremely important – they need to contain maximum info on all the goods shipped, and they need to correspond to other invoices.
If you’re new to this, your best bet is to hire a third-party freight forwarder that will make sure your vendor’s documents are in order. Consider using a vendor checking service that will take care of this as well.
3. Run background checks
Use specialized background checking services for your partners.
These services exist for a reason. If you skip background checks up front to save time, you may in fact waste more time in the future if things are not as they seem.
Third party vendor vetting services will help you ask the right questions and make sure you’re not leaving anything out.
4. Have calls!
Business emails get compromised so often that they make it to the top of the list of B2B payments fraud. More than $300 million was lost in B2B trade due to e-mail spoofing and phishing in 2019. Make sure you are using more than one channel of communication with your vendor.
Call them, have a video chat, use messengers – don’t limit yourself to email only.
Know who you are dealing with, literally.
5. Doubt the website
Look for real info on websites. Make sure there is a real team behind flashy elements and stock images. If you can Google your partners and find links to their social networks, news coverage, case studies and so on, that’s always a good sign!
6. Verify reviews
92% of B2B buyers are likely to purchase after reading a trusted review. However, reviews of your vendor and testimonials from their clients don’t mean anything if they can’t be verified.
If you are operating on a forum or a social marketplace, make sure that most of the reviews come from reputable, aged, and natural-looking accounts. A lot of scammers use bots to inflate their review counts and ratings.
Same with reviews and testimonials on vendor websites – make sure they are clickable and point to legitimate companies, individuals, or websites.
7. Look for flexibility
It might be suspicious if a vendor insists on doing everything its own way and claims that it’s the only way it does business.
Additionally, if a vendor insists on using just one escrow/banking/shipping service, that’s also a red flag. New and better payment systems appear all the time, and you don’t want a rigid partner that resists all change.
8. Look for similar values
Dealing with someone who does not treat work as you do can be a pain. It’s the little things that often matter a lot – how people respond to your messages, how they treat deadlines, how they stick to their promises.
Any initial frustrations you have at the beginning of the engagement are likely to get worse as time goes on without a shared vision of success.
9. Demand clarity
Your vendor needs to be 100% clear about all the terms of your deal. Everything needs to be in writing without any dubious statements.
10. Double-check their capabilities
During your supplier evaluation and audit, make sure you explicitly state your current demand and what you may expect in the future as well. If you want to scale without issues in the future, make sure your vendor has the capability to supply enough goods for you.
11. Avoid middlemen and know who you’re dealing with
Manufacturers and suppliers often need to be dealt with differently. For example they typically require different quality control procedures – sometimes samples are enough, in other cases you’d be better off visiting the actual production line if possible.
Know who your vendor is and how they work and act accordingly.
Look out for middlemen who pretend to be manufacturers – ask for specific information about their operation size, equipment, and staffing and let them know that you might visit their physical operations at any point in the future.
Are you using any more vendor vetting procedures? Share yours in the comments – we’ll be happy to learn what works for you.
If you are looking for a fast and reliable vendor background checking service – sign up here for free.
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