Business inefficiencies exist in almost every market, wasting resources and, more importantly, missed revenue opportunities. With over 32.5 million small businesses in the United States, business owners don’t have time to waste and must look for ways to reduce credit risk while increasing revenues to achieve overall business success. However, due to its tedious nature, one path to growth that is frequently overlooked is business verification.
Small businesses spend an average of 17 days per year verifying and re-verifying themselves for everything from loan applications, new leases, insurance policies, and even new supplier agreements, wasting time and money for each verification. These issues are then compounded when small businesses want to work with large enterprise customers. It takes even more time and effort, which often leads larger enterprise businesses to work with larger, less time-consuming suppliers that appear to be a lower risk on the surface.
For small businesses, particularly when addressing their supply chains, supplier verification is critical to mitigating operational risk. However, small businesses rarely perform supplier verification and monitoring due to costly, demanding processes and a lack of access to efficient solutions with objective information. With disruptions to the supply chain, like the COVID-19 pandemic, which caused almost 60 percent of suppliers to fail in the last year, small businesses can lose valuable time and money trying to find verified and trusted suppliers, which will ultimately result in riskier partnerships.
To mitigate this risk and save time and money, let’s look at the verification process, both being verified and verifying your suppliers, and how streamlining the process can help your business team up with the right suppliers.
- Consolidate your main documents for verification. Businesses are typically asked for 7 to 10 essential items to verify their authenticity during the verification process. These items could include ownership agreements, business licenses, Employer Identification Number (EIN), and more. To streamline verification, this information and paperwork should be digitized and securely stored in one location for easy access. It’s also important to ensure that these documents are kept up to date. For more efficient storage and accessibility, solutions are emerging to keep these documents, verify them and tokenize them so that they can be shared securely and easily for verification purposes.
- Enhance your credibility and trust, as well as your partner’s. Every company’s supplier verification management process is a little different. However, before signing a contract with a new vendor or wholesaler, businesses should confirm certain fundamental details, such as the company’s legal name and address, ownership structure, articles of incorporation, tax information, licenses, credentials, and permits, among others. In addition to identity verification, it is also necessary to review customer due diligence checks such as Know Your Business (KYB), Know Your Customer (KYC), and Anti-Money Laundering (AML), as well as business credit scores, to limit the risk of supply chain disruption.
- Monitor for changes that may impact credibility. Once a partnership is established, the need to vet supply chain vendors does not end. We recommend that you continue the supplier verification procedure throughout your relationship with the vendor or wholesaler. It’s important to regularly monitor your partners for impacts such as change of ownership, workers, location, or other conditions (fraud, non-delivery, late payment, out of business, etc.) as these can significantly influence your supply chain and potentially even your business.
- Verify all your suppliers, existing and new. Today, over 119 million businesses have been verified. Now is the time to enroll companies in the verification process. Make a list of who you do business with so that you can be notified if there is a change in status, which will assist in reducing and managing risk. Furthermore, businesses can improve their cash flow by utilizing the verification process, which allows them to eliminate fraudulent businesses and receive payments on time.
In today’s world, trust is critical for small businesses. Knowing that a business is trustworthy, that its suppliers are authentic and reliable, and that the company can defend itself against supplier fraud, supply chain disruptions, and other inefficiencies are vital for every small business owner. While the procedure might be labor-intensive, small businesses can use the verification process to develop their customer base, manage suppliers, enhance their cash flow, and overall create a trusted network for their business.
So, while business inefficiencies exist everywhere, especially in small businesses, there are several simple ways to reduce credit risk, increase revenue and strengthen your business. Every business, regardless of size, should consider these important factors when it comes to the verification process to see if there are opportunities to streamline the process and strengthen your operations.
Written by Hany Fam.
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