How to prevent vendor fraud in retail?

Companies have to have a system to verify each vendor to make sure the company exists. Once that is done, that vendor is put into the 'approved vendor list. No invoice should be paid to any vendor who is not on the approved list—and at the address that has been verified. A Web site does not mean there is a company, nor does an answering machine.

A phone listing is a good clue; so is a conversation with a real receptionist. One red flag is when invoices are submitted but have not been folded, which means they have not been mailed—rather, they have been created at the office and slipped into the system.

You are right Purvi, you need to have a small but trust worthy vendors. Besides that when implementing a vendor screening program it is essential that, from the very beginning of the process, vendors have a designated number they can call to ask questions. This hot-line makes the process more accessible and efficient, and also provides the vendor with an opportunity to share leads about illicit or unethical behavior.

Thanks Purvi. We can have a system in which we set standards by which a vendors list is created. This list is then tested by an organisation of International repute. This list is then available for use. Yes one thing is for sure only the organised sector will be there in this list. The Unorganised sector will be left out. For checking their credibility one can use the parameters used by the standard list manufacturers. Here the example of Kompass directories will be of great help.

Everyone do business for money. Keep payment as interlock. Pay to the vendor after realizing the sales.