Vendor Validation Quick Hit Checklist
Avoid these common pitfalls
by Ashley Poynter
Content Manager
PaymentWorksVendor Validation Quick Hit Checklist
Vendor validation—when done correctly—is an excellent frontline defense against payment fraud, identity spoofing, and internal control breakdowns. With billions of dollars lost each year to fraudulent vendor activity, the stakes are too high to leave this critical process to chance—or outdated methods.
This article delivers a concise, tactical, and powerful guide to vendor validation, breaking down five essential steps to help protect your business from becoming the next victim. Whether you’re just getting started or refining an existing process, this checklist gives you the framework to move from vulnerable to vigilant.
Table of Contents
The Rise of Vendor Fraud: A Growing Threat to Every Business
Why Vendor Validation Is No Longer Optional
How to be a Rockstar at Vendor Validation (In 5 Easy Steps)
— 2. Improve Vendor Validation With a One-Question Audit
— 3. Stop Relying on Bank Letterhead and Voided Checks
— 4. Rethink and Refine Vendor Calls
Elevate Vendor Validation from Task to Strategy
Get Ready for Vendor Management Day 2025
Want Help Aligning Teams On Vendor Validation?
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The Rise of Vendor Fraud: A Growing Threat to Every Business
In recent years, vendor fraud—particularly external vendor impersonation and payment redirection schemes—has surged to become one of the most financially damaging forms of cybercrime. This type of fraud typically involves a threat actor pretending to be a trusted supplier or vendor, often using spoofed email addresses, fake documents, or social engineering tactics to trick organizations into updating payment details or releasing funds.
The FBI’s Internet Crime Complaint Center (IC3) reported that business email compromise (BEC)—a common method used in vendor fraud—accounted for more than $55 billion in losses over the ten-year period ending in 2023. And while many organizations have tightened email security, fraudsters have evolved right alongside them, exploiting gaps in vendor onboarding and change management workflows.
What makes this threat so dangerous is how convincing it can be. Fraudsters often invest time studying their targets, mimicking vendor logos, email signatures, and communication styles with near perfection. A well-timed phishing email from what appears to be a familiar vendor domain can bypass even the most vigilant employees—especially if your validation process relies on manual checks or legacy tools like email confirmations, phone calls, or voided checks.
Why Vendor Validation Is No Longer Optional
As fraud tactics grow more sophisticated, vendor validation has become a critical layer of defense in the accounts payable (AP) and procurement process. Unfortunately, many companies still rely on outdated or easily manipulated methods to confirm vendor information—such as accepting banking changes over email, trusting static documents, or validating through unsecured phone calls.
These vulnerabilities are exactly what fraudsters are counting on.
And they’re succeeding: A 2024 report from the Association for Financial Professionals (AFP) found that 80% of organizations experienced actual or attempted payment fraud, with vendor impersonation being a top method. Even more alarming, once a payment is sent to a fraudulent account, it’s rarely recoverable—making prevention the only viable strategy.
Vendor validation is not just a “nice to have”—it’s a frontline control. Done right, it helps organizations verify that vendor-submitted information (such as banking details, tax IDs, and addresses) is legitimate, current, and tied to the actual business entity—not a fraudster posing as one.
By embedding vendor validation into your process—and ideally, automating it—you close off one of the most common entry points for external fraud. You also strengthen compliance, improve audit readiness, and show insurance providers and regulators that you’re proactively managing risk.
Not sure where to start? We got you! Take a look at the in-depth explanations for each – and how to fill the gaps – below.
How to be a Rockstar at Vendor Validation (In 5 Easy Steps)
The vendor validation process is much more than a routine checkbox exercise—it’s a strategic effort to protect your organization’s financial integrity, ensure compliance, and reinforce operational trust. Below are five key pillars of a strong vendor validation program, complete with actionable tips and remediation strategies.
1. Accept You’re a Target
No matter your company’s size or industry, fraudsters are watching. In fact, mid-sized and enterprise businesses are particularly vulnerable due to the volume of vendor relationships they manage.
To effectively build a robust vendor validation framework, start with internal self-awareness. Ask yourself: What makes my organization a target—and how can we adapt to stay ahead of threats?
Behavior – Do you take things at face value, or are you operating with the mindset that everything must be questioned?
Culture—Does your organization’s culture give upper management a free pass when it comes to breaking processes? Is this the status quo?
Process – Do you have a process, and is it documented? Is everyone on the same page about roles and responsibilities?
How to fix it
Behavior – Trust no one; question everything. Use a critical eye to examine emails, phone calls, and other vendor verification documents to identify suspicious activity or anomalies that could signal fraud.
Culture – No one should have the “right” to break process. If you’re stuck in a culture that currently operates this way, consider logging each time an exception is requested and/or made. This can be eye-opening information for frequent offenders, the risk department, and the entire organization.
Process – Document your vendor onboarding and management process, including roles and responsibilities, and make sure everyone has been trained on it.
2. Improve Vendor Validation With a One-Question Audit
Here’s a simple audit test: Can you pull the last 20 vendor bank account changes and confirm whether proper validation was performed for each one?
If the answer is “no” or “maybe,” you’ve identified a gap. True vendor validation depends on your ability to audit and prove every step taken in the process.
How to fix it
If you don’t currently have this process defined or documented, do it now. Understand who owns the process, and make sure there are mechanisms in place to track whether the process is being followed. You should be able to look back at the last 20 bank account changes and know whether or not the process was followed.
3. Stop Relying on Bank Letterhead and Voided Checks
We live in the digital age, so your vendor validation process should be up to par. It’s no longer good enough to rely on bank letterhead and voided checks to confirm banking details; both can easily be forged (hello, Adobe!).
Neither of these items offers proof of account ownership. Worse yet, when transmitted via email, they can be easily intercepted and swapped out.
How to fix it
Digital fraud requires a digital solution. Your best bet is to leverage an automated platform that can run checks with third parties via a proprietary algorithm. It’s a surefire way to determine the accuracy and validity of all vendor-submitted identity elements.
4. Rethink and Refine Vendor Calls
Here’s the problem: it’s easy to verify the owner of an outgoing phone number (though SEO fraud can introduce complications here); it’s not as straightforward to verify the validity and ownership of incoming calls.
Additionally, relying solely on phone calls may not provide a sufficient audit trail or documentation of the verification process. In case of disputes, having a documented record of verification is crucial for accountability and compliance purposes.
Then, there’s the possibility that you leave someone a voicemail, which gets forwarded to their email. If that email gets hacked, it’s very easy for someone to intercept your message and call back, posing as the vendor. And yes, burner phones are a real thing.
How to fix it
In the same vein as our advice above, automating the vendor validation process is your best bet. For starters, your vendors will need to log in (securely) to the platform to submit identity documents, so they need login credentials.
Secondly, all submitted information and change requests are run through a robust (and automated!) verification process, returning either an “accepted” or “rejected” status. In a case where more information is needed, that too needs to be submitted through the secure platform and undergo the same stringent checks.
5. Understand Your Coverage
If you’re able to get coverage for cases of fraud, be certain you know what that policy covers. Here are some questions to ask:
- Does our current crime insurance or cyber insurance policy cover losses if I am tricked by a fraudster and send money to the wrong account?
- Are there scenarios where a mistake I make is not covered?
The bad news is that most policies require coverage for this type of loss to be affirmatively added. Even when you can score it, limits tend to be very low. In most cases, coverage is difficult to obtain due to rising losses.
How to fix it
Document your process! Write it down! This is exactly the type of due diligence insurance companies are looking for when evaluating whether or not you’re insurable for this type of coverage. They want to know you’re doing everything in your power to prevent and deter fraud. Even with documented processes, those who use manual verification tasks may find it’s still an uphill battle to get coverage.
Again, working with an automated platform provides the highest level of due diligence you can achieve. Insurers love this. Given the sophisticated level of digital fraud running rampant, using an automated platform is like fighting fire with fire – and insurers love it.
Elevate Vendor Validation from Task to Strategy
Vendor validation isn’t just a compliance item or a fraud-prevention tactic—it’s a strategic capability. Businesses that prioritize this area are less likely to fall victim to attacks, more likely to maintain healthy vendor relationships, and better positioned to grow with confidence.
To recap:
- Build awareness and accountability into your culture.
- Implement airtight, auditable processes.
- Retire outdated tools in favor of secure, automated platforms.
- Know your insurance posture and prepare for contingencies.
Invest in vendor validation now to safeguard your future from unnecessary losses, regulatory scrutiny, and reputational harm. It’s not about checking a box—it’s about checking your blind spots.
Get Ready For Vendor Management Appreciation 2025
The Vendor Management Appreciation Day (#VMAD) celebration continues in 2025! And you should join us.
Why? Because there’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.
Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for the 2025 celebration, and we want you to be a part of it!
VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.
Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.
In the meantime, learn more here, and grab some free vendor management goodies.
Want Help Aligning Teams On Vendor Validation?
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Vendor Verification: How NOT to Do it and What to Do Instead
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