Your Supplier Just Failed Verification. Now What?

A red result from a supplier verification is not the end of the process — it is the beginning of a more careful one. What you do next depends on which checks failed and how badly. This guide gives you a decision framework for the most common failure patterns.

WARN vs FAIL: the distinction matters

A WARN means the check found something that does not meet the expected standard but is not conclusive evidence of fraud. Common WARN results: an ABN registered less than six months ago, a website with no HTTPS, an email domain without DMARC, a GST registration that is relatively recent. These are flags, not verdicts.

A FAIL means the check found a clear problem. Common FAIL results: a cancelled ABN, a company on the ASIC insolvency register, an email domain on a spam blacklist, a phone number that could not be verified to an authorised person.

A single WARN on ABN age is different from a FAIL on insolvency plus a WARN on domain age. Read the full result before deciding.

Failed ABN check

If the ABN check returns FAIL, the ABN is cancelled or was never valid. Do not pay the invoice. Contact the supplier and request confirmation of their current ABN. Cross-check on the ABR directly. If the supplier cannot provide a current, active ABN, do not proceed — paying a supplier without a valid ABN has GST and withholding tax implications.

If the ABN check returns WARN, the ABN is active but was registered recently (under six months). This is a phoenix company risk indicator. Combine it with the insolvency and WHOIS checks before deciding.

Failed insolvency check

A FAIL on the insolvency check means the entity appears on the ASIC insolvency register — in external administration, under a deed of company arrangement, or subject to a winding-up order. This is a hard stop. Do not pay outstanding invoices without legal advice. Payments made to a company in administration may be recoverable by the administrator as unfair preferences.

Escalate immediately to your finance manager or legal team. Do not contact the supplier directly without guidance.

Failed or warned web and domain checks

A website registered in the last few weeks, a domain with no HTTPS, or a parked page are all common in phoenix and fictitious supplier fraud. Cross-reference with how long you have dealt with this supplier. If this is a new supplier and the web presence is brand new, treat it as a significant risk indicator and add a phone verify before releasing payment.

Failed phone verification

A failed phone verify means Gumshoe could not confirm an authorised person at the registered number. This does not mean the supplier is fraudulent — the call may have been missed or the number changed. Reschedule the call or call the supplier directly using a number you can independently verify (not one from the invoice). If the supplier refuses to complete a phone verification, that is a significant red flag.

When to proceed despite warnings

Some WARN results are explainable. A new ABN from a legitimate startup, a sole trader without DMARC, or a small business with a basic web presence — these are common and not inherently suspicious. The question is whether the warnings cluster and whether the pattern matches known fraud signals.

Document your reasoning. If you decide to proceed with a supplier that has WARN results, note why in the saved case. That record protects you and your organisation if the decision is ever questioned.

When to walk away

Walk away — or at minimum, escalate — when: an insolvency register FAIL appears, two or more checks FAIL simultaneously, the WHOIS and ABN registration dates are both very recent on a new supplier, or the phone verify cannot be completed after two attempts.

Supplier due diligence is not about finding reasons to reject suppliers. It is about having a consistent, documented process so that when fraud does occur, you can demonstrate you followed reasonable steps.

Uncommon Insights

One often-overlooked aspect of supplier verification is the six-month ABN registration warning period. While an ABN registered less than six months ago may only trigger a WARN result, it is crucial to consider the GST implications and potential tax risk for invalid ABNs. Under section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999, a supplier must be registered for GST to charge GST on taxable supplies. If an ABN is invalid, the supplier may not be entitled to charge GST, and your organisation may be liable for any resulting tax shortfall.

ASIC's insolvency register is a critical data point in supplier verification, and a FAIL result on this check indicates a high-risk supplier. Under section 459E of the Corporations Act 2001, a company in external administration may be subject to a winding-up order, and payments made to such a company may be recoverable by the administrator as unfair preferences. In such cases, it is essential to escalate the matter to your finance manager or legal team immediately and seek guidance before making any payments.

The distinction between a WARN and a FAIL result is crucial in supplier verification. A WARN result may indicate a non-compliance issue, such as a recent GST registration, while a FAIL result may indicate a clear problem, such as a cancelled ABN. Under the ATO's GST registration requirements, a supplier must register for GST within 21 days of becoming required to be registered. A recent GST registration may trigger a WARN result, but it is essential to consider the context and other verification results before making a payment decision.

Phoenix company risk is a significant concern in supplier verification, and a WARN result on ABN age or domain age may indicate a potential phoenix company. Under section 596AB of the Corporations Act 2001, a phoenix company is defined as a company that is involved in a scheme to avoid paying its debts. In such cases, it is essential to combine the verification results with other checks, such as insolvency and WHOIS checks, before deciding whether to proceed with a payment.