How to Vet Suppliers and Avoid Fake Vendor Scams

Fake vendor scams can cost small businesses thousands, whether criminals pose as new suppliers, impersonate existing vendors or send fraudulent invoices.

Here’s how to vet a supplier before doing business, spot warning signs of vendor fraud and protect your payments from scams.

Key takeaways

Fake vendor scams can involve bogus suppliers, fake invoices or criminals impersonating companies you already work with.
Before paying a new supplier, verify its business registration, contact details, reputation and payment information independently.
Treat unexpected changes to bank details as a major warning sign and confirm them through a trusted contact method.
Unusually low prices, pressure to pay quickly and unusual payment requests can signal supplier fraud.
Clear invoice approval and payment verification processes can help stop fraudulent payments before money leaves your business.

What Are Fake Vendor and Supplier Scams?

Fake supplier scams happen when fraudsters pose as real vendors, tricking businesses into paying for fake or non-existent goods and services. These scams can take different forms, including:

Fake invoices – You receive an invoice from a company that looks legitimate, but you never ordered anything from them.

Impersonation scams – A scammer pretends to be your current supplier and asks you to update your payment details (redirecting your money to their account).

Bogus suppliers – A fake company offers amazing deals, takes your payment and disappears.
Low-quality goods – A supplier delivers items that are defective, low-quality, or completely different from what was promised.

Real-Life Fake Supplier Scam: How One Business Lost £16,000

Alan Steven, a farmer in Fife, Scotland, never suspected anything was wrong when he received invoices from his regular suppliers. They looked identical to the ones he usually paid—except for one small but crucial difference: the bank details had been changed.

Without realizing it, Alan paid £12,000 to a building contractor and £16,000 to a grain merchant—money that actually went straight into scammers’ accounts. It wasn’t until a genuine supplier chased him for payment that he realized he had been scammed.

Hackers had infiltrated Alan’s email, intercepted real invoices, and replaced the bank details with their own. Like many small business owners, Alan was juggling farm work with administrative tasks and didn’t notice the subtle change. “We’re not office people,” he admitted. “I needed to pay some bills and get the work done.”

Although his bank and insurance recovered some of the funds, he still lost £16,000—money he’ll never see again. “It was like losing a year’s wages,” he said, devastated. “You can’t just forget about it.”

Alan’s experience is far from unique. Invoice fraud is a growing threat, with businesses losing nearly £50 million last year alone—most scams start with a simple email.

Source: bbc.com

How to Spot a Fake Supplier: Vendor Scam Red Flags

No single warning sign proves that a supplier is fake. But several inconsistencies together—or an unexpected change in how an existing supplier asks to be paid—should give you a reason to verify before sending money.

Watch for:

Prices that seem unusually low. A deal significantly below normal market prices may be used to persuade you to pay before asking too many questions.
Pressure to pay quickly. Be cautious if a supplier creates unnecessary urgency, particularly when asking for a large upfront payment.
Unexpected changes to payment details. If an existing supplier suddenly provides a new bank account, confirm the change using contact information you already trust.
Payment details that don't match the supplier. A request to send money to an individual or unrelated company deserves additional verification.
Business details you can't independently verify. Check the company name, registration information, website, address and contact details against reliable sources.
Inconsistencies in invoices or emails. Changes in formatting, contact details, email domains, bank information or the way a familiar supplier communicates can be warning signs.
Unusual payment methods. Requests for cryptocurrency, gift cards or other difficult-to-reverse payment methods should be treated with caution.

How to Vet a Supplier Before Doing Business

Verify the supplier is a real business

Before placing an order or signing a contract, research the supplier’s background.

Look up their website and contact details. Legitimate suppliers have a professional website with clear contact information. Be wary of businesses that only provide a mobile number or free email address (e.g., Gmail, Yahoo).
Verify their business registration. Check if the company is officially registered. Depending on your country, you can use online government databases to confirm their business license.
Search for reviews and complaints. Look for reviews on Google, Trustpilot, or industry forums. If there are too many negative reviews or no reviews at all, proceed with caution.
Check their address. A quick Google Maps search can help verify if the company operates from a real business location. Be suspicious if the address leads to a residential area or an empty lot.

Contact the supplier independently

Call their official number. Scammers often use fake websites with stolen company names. If you find a supplier online, call them to confirm they are real.
Verify employee details. If a sales representative contacts you, check their LinkedIn profile or ask for a company email address. Be cautious if they only communicate via messaging apps.
Ask for references. A trustworthy supplier should be able to provide references from other businesses they work with. Contact these references to ask about their experience.

Check how they want to be paid

Scammers often ask for unusual payment methods that make it hard to track or recover your money.

Avoid suppliers that demand:

Upfront payments with no contract or invoice.
Wire transfers to personal bank accounts.
Payments via cryptocurrency or gift cards.

Use secure payment methods like business credit cards or escrow services that protect you in case of fraud.

Look for inconsistencies in their communication

Fake suppliers often make mistakes that can give them away.

Warning signs to watch for:

Poorly written emails with spelling mistakes.
Urgent or pushy sales tactics. Scammers try to rush you into making a quick decision.
Email addresses that don’t match the company domain. (e.g., an email from @gmail.com instead of @realsupplier.com)

Verify bank details before sending money

If a supplier asks you to change payment details, verify with them directly using a known phone number (not the one provided in the email). Business email compromise (BEC) scams often involve fraudsters hacking supplier emails to change payment details.

Keep a record of approved suppliers and payment details

If you work with multiple suppliers, consider using vendor verification software or services that track supplier reputation, confirm business credentials, and detect fraud risks. A structured vendor management system helps keep track of suppliers, verify legitimacy, and reduce fraud risks.

How to Protect Your Small Business from Supplier and Vendor Fraud

Preventing fake supplier scams starts with strong security measures and clear processes for managing vendors. Here’s how to reduce the risk of fraud:

Train employees to recognize fraud – Educate your team on spotting fake invoices, phishing emails, and payment scams.
Verify every invoice – Always cross-check invoices with purchase orders before making payments.
Monitor transactions – Regularly review bank statements for unauthorized payments.
Use email security tools to protect against phishing, impersonation, and fake invoice scams that may trick you or your employees into transferring money to fraudsters. Cybercriminals often craft emails that mimic trusted suppliers, leading businesses to mistakenly send funds to fraudulent accounts. Bitdefender Ultimate Small Business Security offers advanced scam detection and email protection features that can help block these attacks before they reach your inbox.

Stay protected and keep your business finances secure.

Check out our plans for small businesses.

FAQs

How can I check if a supplier is legitimate?

Verify the company through an official business registry, check its website and contact details, and look for an established business presence and independent reviews. Contact the supplier using details you found independently rather than relying only on information provided in an email or invoice.

What are the warning signs of a fake supplier?

Warning signs can include unusually low prices, pressure to pay quickly, business details that are difficult to verify, unexpected bank account changes and requests to send money to personal accounts or through unusual payment methods.

How should I verify a supplier's bank details?

Use a phone number or other contact method you already know is genuine. Don't verify new bank details by replying to the same email that requested the change, as a scammer may have compromised or impersonated the supplier's email account.

What should I do if a supplier suddenly changes their bank details?

Don't send the payment until you've confirmed the change independently. Contact someone you already know at the supplier using a trusted phone number or contact method and ask them to verify the new details.

What should I do if I paid a fake supplier?

Contact your bank or payment provider immediately and ask whether the payment can be stopped or recovered. Secure any accounts that may have been compromised, preserve emails and payment records, check for other fraudulent transactions and report the scam to the appropriate fraud or law enforcement authority in your country.