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St. Cloud Times, Minn., Bright Ideas column [St. Cloud Times, Minn.](St. Cloud Times (MN) Via Acquire Media NewsEdge) Sept. 13--There's a small company on the southwest side of St. Cloud that is out to make a big name for itself by helping businesses all over the country protect themselves against vendor fraud. Global Edge, which has 15 employees, launched five years ago as a spinoff from an accounts payable audit firm. Jay Cherry, a 50-year-old former Marine, started Global Edge after it became apparent to him that clients needed something different. "We take more of a holistic approach to managing their vendors," said Cherry, who has 25 years of experience working with risk in the financial services industry. "Most of the issues in auditing stem from poor vendor management." With the help of Reshma Ismail, a senior database administrator from India via St. Cloud State University, and Cheryl Patton, a 40-year-old from Foley who became director of operations, Global Edge developed Vendor Lynx. The software creates a service platform that acts like border patrol for companies. "When it comes to their vendors, it's like they're knocking on the door because they want to come in," explained Emily Unterberger, who has been marketing manager at Global Edge for the past year. "You want to know 'Who are you?' And 'Let me see your validation that you can do business with us, that you're allowed to do business in the United States.' We want to make sure they're not bringing anything illegal in or carrying any baggage with them." Global Edge is seeking a patent for Vendor Lynx, which earned the company one of the two annual Innovation Awards sponsored by the Greater St. Cloud Development Corp. In the emerging business category, Global Edge follows last year's winner, Orange Oak Advertising, to earn a $1,000 prize. Global Edge and Coldspring, the winner in the established business category, will be honored during the Innovation Summit on Sept. 25 at River's Edge Convention Center. "I think they fit a specific niche and we're fortunate to have them located here," said Mark Schmidt, director of the Center for Information Assurance Studies in the Herberger Business School at St. Cloud State. "You wouldn't even know they're there if you drive by their building along (Highway) 15, but there's some important stuff going on in there." A competitive edge Cherry moved to St. Cloud from San Diego more than a decade ago as a representative of Encore Capital. It bought assets from Jefferson Capital, where Patton worked in the former Fingerhut building, as part of a $200 million deal. Many of the Global Edge executives are people Cherry brought from Encore. The technology that led to Vendor Lynx was built in partnership with the Mayo Clinic. "By them being part of our journey, we've had tremendous exposure to best practices in supply chain management," Cherry said. "The intent of our product is to protect that supply chain. In Mayo's case, you have three main campuses and 72 additional sites. All their buying is centralized, but they have 30,000 suppliers. If one of those hospitals needs a product, they have to go through a requisitioning process, engage a vendor, have a contract, buy it, pay for it, receive it and disburse it. What we do is make sure that supplier they're going to work with goes through a registration process. We collect basic business details and then we authenticate them." Cherry said Vendor Lynx looks at several hundred risk factors to make sure a business is legitimate and financially stable. "We make sure the vendors aren't on any federal sanction lists," said Patton, who is seeking the patent with Cherry. Potential terrorist fronts is one area Vendor Lynx flags. And ignorance is no excuse for the fines that can reach millions of dollars for doing business with those on a government sanction list. Patton said the product also checks various state lists to make sure vendors are in good standing with regard to licensing requirements, any recent bankruptcy or other factors that could put Global Edge clients at risk. "If our clients place an order and, for whatever reason, that vendor can't fill that in the time frame expected, that can greatly affect their business," Patton said. "We do a full business evaluation of those contacts." Red flags Patton said an example of a vendor that might generate a red flag via Vendor Lynx would be a doctor who has submitted fraudulent Medicare claims. The software also evaluates employees and flags potential conflicts of interest. "For example, a transportation company might hire a driver," Patton said. "We need to make sure that business is operating appropriately and has the right license. We had an example where a driver was operating under the previous owner's name and didn't have all their paperwork. That driver was driving Mayo Clinic doctors back and forth from the airport, which puts Mayo Clinic at risk." Vendor Lynx verifies Secretary of State filings to make sure vendors have proper tax identification numbers. The scrutiny includes nine dimensions of IRS tax data. About 2 percent of the time, Cherry said, Global Edge clients have been doing business with clients at an incorrect or abandoned address. "It doesn't mean they're not doing business -- they may have moved," Cherry said. "It just means there's something abnormal about that company that needs to be corrected." Global Edge works with the vendors to correct addresses, update filings and do whatever they need to get into compliance. "Parts and pieces of what we do existed, but it may have taken seven vendors to do what we do today in one application," Cherry said. "If you're a large organization and you have sensitive data -- tax IDs, Social Security numbers -- you want to protect that information. If you have to give it to seven different vendors, you're six times more exposed than if you give it to one. We need the information once and we can provide all these functions." Could save millions According to Global Edge, a member of the Association of Certified Fraud Examiners, 1.6 percent of the vendors for a typical business present a risk for being fraudulent or otherwise out of compliance with government regulations. If a medium-sized hospital has 4,000 vendors, that means 64 should not be paid for one reason or another. If the average annual per-vendor expenditure is $30,000, that amounts to more than $1.9 million in annual cost avoidance. Schmidt offers other scenarios that could affect a large company. "If a place like (General Electric) gets a bill for $27.19, are they going to spend three hours investigating that charge?" Schmidt said. "In most companies, there's probably a threshold where they just pay the bill. It could be coming from a post office box that traces back to someone in prison. If you send out 100 of these invoices and only get a small percentage back, you're still coming out ahead because all you're out is the postage. Some even file paperwork to give themselves the appearance of legitimacy. There's a need for a system to root out these problems." Cherry said most businesses don't know about the problem or don't want to acknowledge it. "And, actually, the smaller the organization, the less likely you are to know about it," Cherry said. "That's because the owner is wearing 12 hats and he's busy and they can't watch their shop as well as the bigger people. The businesses most exposed to fraud are those with less than 100 employees." The science behind the Vendor Lynx technology is multi-factor authentication. The platform allows clients to invite vendors to log into the system and clean up whatever data is in question. The vendor, then, is doing the electronic "paperwork." Proprietary analytics yield a scoring system that highlights risks for each vendor in a dashboard for the client. Global Edge is a privately held Native American-owned company, headquartered in St. Cloud, and a subsidiary of California-based JH Capital Group. Three-quarters of its business is in health care, but it has engagements in other industries and another service that works with city governments. So, where does Global Edge grow from here? "Everyone has heard of Dun & Bradstreet, right?" Cherry asked. "We want to be known as the objective Dun & Bradstreet. We've got half a million vendors in our database and it's growing every day. We have the kind of analytics that give you very objective data. I could see a day where people come to us when they want information about a business. We won't have to pull people in." Got a Bright Idea? If you or someone you know is doing something innovative, creative or unique in Central Minnesota business, let us know and it could be featured here. Call Times Business Reporter Kevin Allenspach at 320-255-8745 or email [email protected] and let us know your Bright Idea. Follow Kevin Allenspach on Twitter @KevinAllenspach. ___ (c)2014 the St. Cloud Times (St. Cloud, Minn.) Visit the St. Cloud Times (St. Cloud, Minn.) at www.sctimes.com Distributed by MCT Information Services |