The vendor onboarding policies and thoroughness of due-diligence depends on several factors like the size of your organisation, criticalness of a vendor to your business, size and nature of transaction, etc. However, these are five essential checks you should always perform on a vendor to avoid trouble later.
- KYC documents: Verify the GSTIN, PAN and company incorporation certificate of the vendor. Verify if supplier has any other specific licenses, registrations or certificates required. E.g FSSAI certificate in food and beverage industry.
- Revenue from operations: Check the operating revenues of the vendor for last 3-5 years. See if they are going up or down. If they are going down, what are the reasons? Could they be losing business because of unreliability? Is it a temporary situation?
- Registration details: Verify address, CIN, incorporation date, status, and directors’ address as provided by vendor against a third party website.
- Other business interests: Check if the vendor has other conflicting businesses or has many directorships in other companies. Multiple business interests means less focus on one business. You may not want to tie up with such a vendor.
- Your organisation’s blacklist: Many organisations create their own negative list or blacklist of companies to not work with. Check that your new vendor is not in that list or any of its related-party is not in that list. Also, do check that the vendor is not in RBI, SEBI or MCA defaulter lists.
These 5 essential checks could form the basis of your vendor onboarding process. You could then evolve the process gradually as your business needs increase.
