Vacation-Ready Vendor Management Policy

by Ashley Poynter

Content Manager

How to Achieve Vacation-Ready Vendor Management With the Right Vendor Management Policy

Vacation should be a time to relax and recharge, but for many professionals, especially those involved in vendor management, taking time off can be a big source of stress. The fear that something will fall through the cracks while they’re away can be overwhelming. To achieve a vacation-ready vendor management system, an organization must develop not only robust, documented processes but also a supportive company culture that upholds these standards.

This blog explores how to integrate efficient vendor onboarding and management practices with a strong cultural foundation, ensuring your organization runs smoothly and fraud-free, no matter who’s on vacation.

Good Vendor Management Policy Is Process and People

Vendor Management Policy Gone Wrong: What Happens When People and Processes Aren’t In Sync

– Onboarding Form/Invitation

– Payment Optimization

– Form Submission

– Compliance and Security Checks

– Approval Workflows and Audit Trail

– Existing Supplier Updates

Improving Vendor Management Policy (and Culture) with Automation

Get Ready for Vendor Management Appreciation Day 2024

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Good Vendor Management Policy is Process and People

An effective vendor management policy is not solely about having the right processes in place; it’s equally about the people who execute these processes and their commitment to them. This cohesion is essential for maintaining smooth operations and mitigating risks. Getting buy-in from all levels of the organization, particularly from higher-ups, is critical. In many organizations, less-than-ideal cultures allow a pervasive culture of exceptions where higher-ups frequently bypass established procedures, setting a precedent that others follow.

As a result, a culture of exceptions and uneven footing permeates the organization. Nobody knows what the “accepted” practices are because not everybody follows them. What’s more, people begin to expect that the C-suite will ask for exceptions to be made. It’s a recipe for disaster.

Everyone should adhere to a documented vendor management policy (including processes) – without exceptions. This means that senior management must model the behavior they expect from their teams. When leadership demonstrates a commitment to following vendor management protocols, it sets a standard for the rest of the organization, and it keeps the organization safe from fraudsters who like to impersonate leadership asking for favors. Snow Rutkowske of Huron Consulting explains how to gain support from leadership for the vendor desk by establishing a protocol, sticking to it, and illustrating the consequences of deviating from it:

On the other hand, when higher-ups break the process frequently, it undermines the importance of these procedures, leading to inconsistencies and increased risks. No one will see it coming when a fraudster posing as your CFO asks you to reroute a multi-million dollar payment to a bank account in the Cayman Islands. But everyone will know how it happened.

Vendor Management Policy Gone Wrong: What Happens When People and Processes Aren’t In Sync

For a vendor management policy to be effective and fraud-free, it is crucial to have both well-documented processes and full buy-in from employees and management. Each step in the vendor onboarding and management process plays a vital role in maintaining the integrity of the system and preventing fraud. Here’s a detailed look at these steps and why they are critical.

Onboarding form/invitation

Work is often contracted (and completed!) before the PO is issued. This practice can lead to payment delays and disputes. Documenting and enforcing a process where a purchase order (PO) is issued before any work begins ensures that all vendor activities are tracked and approved in advance.

Additionally, you might find yourself in a situation where multiple departments invite the same vendor, so duplicates abound. And no one is taking a vacation with 100s of duplicates to sort through.

Without a documented process about how to invite vendors (or a centralized onboarding system), this redundancy makes it difficult to manage vendor relationships and track spending. Jenn Glassman, P2P consultant, talks about why traditional vendor onboarding can be problematic:

Payment optimization

This is a big one. Despite internal mandates to use electronic payments, the majority of vendors are still paid by check. According to PYMNTS.com, 8 in 10 organizations still rely on this legacy payment method. This is often due to incomplete contact information and ineffective communication strategies, which make it difficult to reach out and educate vendors about electronic payment options.

Organizations also lack efficient, systematic ways to switch vendors to electronic payments like virtual cards. And let’s not forget how a lack of reporting on payments strategy can really throw a wrench in vacation plans.

Form submission

Chasing Vendors for Documentation: Business units often resort to email or snail mail to gather onboarding documentation, leading to delays and inefficiencies. No one wants to cancel their flight to the Bahamas because they’re chasing vendors for documentation.

Then, once you have it, you have to decipher and organize it. The vendor desk must sort through and organize a plethora of submitted documents, a task prone to human error.

Manually verifying the legitimacy of submitted information is time-consuming.

Don’t forget the communication gaps. Business units are often left in the dark about vendors’ onboarding status unless they follow up repeatedly. I hope you like answering emails from the beach! But remember: communicating with vendors via email or phone, outside of a secure and auditable system, increases the risk of information mishandling.

Compliance and security checks

Ah yes, the manual verification of tax ID and address – what fun! Doing this through third-party tools without integration is inefficient and increases the risk of errors. Same with sanctions list checks; checking sanctions lists manually at onboarding and before issuing each PO is labor-intensive and prone to oversight.

And let’s not forget that these checks are not “one-and-done;” AP expert Debra Richardson of Debra Richardson LLC points out how hard it can be to keep up when your processes are completely manual:

Then there’s the all-important banking information verification. Gaining confidence in the legitimacy of vendor banking information through manual checks or third-party calls is another time-consuming task vulnerable to fraud. It’s especially vulnerable if your company culture makes exceptions to this important step.

Approval workflows and audit trail

Tracking approvals outside of your ERP means managing approvals through spreadsheets and emails, aka a total lack of transparency and control. In some cases, approvers may see more vendor information than necessary, increasing the risk of data breaches.

Moreover, inefficiencies abound. Without tracking cycle time, it’s difficult to identify bottlenecks and inefficiencies in the approval process. And returning documents for specific approvers creates a paper chase, complicating the process. Finally, these fragmented processes are almost impossible to adequately insure, increasing risk exposure and significantly lowering your chances of taking a stress-free vacation this year.

Existing supplier updates

Receiving updates via email or phone is insecure and increases the risk of fraud. Bonus points if, you guessed it, your culture is one of exceptions. It’s harder to sift through what’s reasonable or suspicious when your organization (or just one person) isn’t following set procedures and guidelines.

In other words, poor internal controls make it difficult to maintain an auditable process. Spoiler alert: existing supplier updates are the number one entry point for fraudsters attempting to take over accounts.

The vendor onboarding and management process is rife with opportunities for mistakes and fraud all on its own. Add to it a culture that permits exceptions, and that risk elevates exponentially.

Additionally, when you consider the increased risk of manual processes, things become really dire. Manual processes in vendor management not only slow down operations but also increase the risk of errors and fraud. These processes are labor-intensive and prone to human error, making it difficult to maintain consistency and security. For instance, manual data entry can lead to inaccuracies that compromise the integrity of the vendor database. Additionally, relying on email and phone calls for communication and documentation exposes the organization to security breaches.

Good news: automation can help.

Improving Vendor Management Policy (and Culture) with Automation

Integrating an automated vendor onboarding and management platform can transform company culture and significantly reduce risks. Here are ten ways to achieve this:

Centralized Onboarding System: Use an automated platform to centralize the onboarding process, ensuring all departments follow the same procedures and reducing the risk of duplicate vendors.
Automated data collection: Implement digital forms that automatically populate internal systems, minimizing manual data entry errors.
Real-time verification: Use automated tools to verify vendor information in real time, including tax IDs, bank details, and compliance checks.
Secure communication channels: Employ secure, encrypted communication channels for all vendor interactions to protect sensitive information. Debra Richardson is back with some more insights on how automation helps here:
Audit trails: Ensure that the automated platform maintains comprehensive audit trails, documenting all actions and changes for accountability.
Automated compliance checks: Integrate compliance checks into the onboarding process, automatically verifying vendors against sanctions lists and regulatory requirements.
Scalable workflows: Utilize scalable workflows that can handle increased vendor volumes without additional manual effort, ensuring efficiency as the business grows.
Integrated approval processes: Incorporate approval workflows into the ERP system, eliminating the need for external tracking and enhancing transparency.
Automated payment methods: Transition vendors to electronic payment methods through an automated system, reducing reliance on checks and improving payment security.

Continuous monitoring: Implement continuous monitoring tools to track vendor performance and compliance, enabling proactive risk management.

Achieving vacation-ready vendor management requires a combination of robust, documented processes and a supportive company culture that enforces these standards. The right vendor management policy will cover every angle. By automating key aspects of vendor onboarding and management, organizations can reduce manual errors, enhance compliance, and mitigate risks.

This not only ensures smooth operations but also allows employees to take vacations with confidence, knowing that the system will run efficiently in their absence. Embracing automation and fostering a culture of adherence to vendor management policy and processes are essential steps toward creating a resilient and efficient vendor management system.

Get Ready For Vendor Management Appreciation 2024

Speaking of vendor management policy, will you be partying with us for Vendor Management Appreciation Day (VMAD) 2024? We highly encourage you to join us!

Why? Because there’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.

Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for the 2024 celebration, and we want you to be a part of it!

VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.

Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.

In the meantime, learn more here, and grab some free vendor management goodies.