Vendor payments have always been a focal point for auditors. Traditionally, the primary goal of vendor due diligence was to prevent wrong or fraudulent payments and ensure sound financial governance. But times have changed. Regulatory authorities are now demanding deeper, ongoing scrutiny of vendors,not just at onboarding, but throughout the lifecycle of the vendor relationship.
The Earlier Approach to Vendor Due Diligence
Historically, vendor due diligence checks revolved around payment accuracy and fraud prevention. These included:
- Duplicate invoice checks
- MSME vendor verification
- GST validation
- Vendor onboarding checks
- Purchase Order (PO) validation
- Goods Receipt Note (GRN) checks
- Advance payment verification
- Overbilling checks
- Fraudulent bill detection
These measures were designed to strengthen financial controls and prevent governance failures.
The New Reality: Stricter Compliance Requirements
Today, traditional checks are no longer enough. Regulatory bodies like the RBI and statutory authorities such as the Tax Department now mandate the next level of vendor due diligence.
New requirements include:
- Tax compliance checks – verifying whether vendors are filing their taxes on time
- e-Invoicing compliance – ensuring vendor invoices align with government e-invoicing mandates
- GST filing checks – confirming vendors are filing GST returns regularly
- Bank account verification – validating beneficiary details to prevent fraud
- Identity checks – PAN card and KYC compliance
- And more emerging regulatory checks as frameworks evolve
The Cost of Non-Compliance
Failure to keep up with vendor compliance requirements can have severe consequences. Organisations risk:
- Stiff penalties and fines from regulators
- Debarring or disqualification from operating certain business activities
- Loss of reputation in the market
- Financial losses due to fraud or tax irregularities
- Job or position risk for accountable executives
In short, weak due diligence exposes businesses to legal, financial, and operational risks.
How Organisations Are Responding
Forward-looking companies are moving away from manual, people-dependent processes and embracing digitised, automated due diligence frameworks. Key initiatives include:
1. Stringent Vendor Onboarding
- Collecting comprehensive vendor information upfront
- Setting clear approval workflows across departments
2. Ongoing Due Diligence
- Conducting regular checks, not just at onboarding
- Quarterly due diligence becoming a common practice
3. Category-Specific Due Diligence
- Applying stricter checks for vendors handling sensitive areas such as customer data, outsourced services, or regulated processes
4. Third-Party and Internal Audits
- Engaging independent auditors for proactive reviews
- Ensuring smoother statutory and regulatory compliance
5. Digital Transformation
- Adopting Automated Vendor Compliance Solutions such as Expenzing Procure-to-Pay
- Ensuring due diligence is always up-to-date, comprehensive, and less dependent on human oversight
Conclusion: The Time to Automate is Now
The compliance landscape around vendor due diligence is only becoming more demanding. Non-compliance risks,penalties, disqualification, and reputational damage,are too costly for organisations to ignore.
The future lies in automated, AI-powered vendor compliance solutions that deliver ongoing checks, integrate with regulatory systems, and eliminate human error.
Solutions like Expenzing’s Procure-to-Pay platform help organisations stay audit-ready, reduce risk exposure, and meet regulatory expectations with ease.
The message is clear: compliance requirements will only increase,so the time to automate vendor due diligence is now.
