Risky Business with PaymentWorks: E7–Keeping it Clean
The ROI on Vendor Management
This blog was originally published in 2021 but was updated in November 2023 for accuracy and comprehensiveness – and to re-emphasize the importance of having the right vendor management strategy.
What is your vendor management strategy? If you find yourself scratching your head, you’re probably not alone.
Vendor management often gets tossed in a corner as an administrative function that “just needs to get done.”
We’re here to say otherwise. Better yet, our podcast guest, Julie-Anne White, is going to walk you through why clean data and a vendor management strategy are foundational to your business.
Welcome to Episode 7 of Risky Business with PaymentWorks!
Julie-Anne White isn’t going to argue that having a clean vendor master file is more important to a company than generating sales and growing revenue. (Because it isn’t.)
But that doesn’t mean the financial industry veteran thinks companies should penny-pinch by failing to devote resources to vendor management. (Because they shouldn’t.)
Julie-Anne White has extensive experience in all financial functions, cash management and shared services functions, investment performance analysis, feasibility studies, process improvement, internal and external client relationship management, and regulatory compliance and risk prevention.
White has spent more than 30 years working in back office management, most recently as vice president of Treasury Shared Services at the environmental services company Clean Harbors. (Disclosure: Julie-Anne White is a former employee of Clean Harbors, a customer of PaymentWorks. This article reflects her opinions and not those of Clean Harbors.)
She also served as the VP of Finance Operations and Compliance Manager for State Street’s Corporate Citizenship and Foundation and before that as their VP, Client Relationship Management.
During White’s time at Clean Harbors, vendor database inaccuracies became a growing concern. This is not unusual; companies favor activities that, from leadership’s perspective, more directly support the organization’s mission. Top-line metrics like sales and revenue tend to steal the attention. And while that’s not bad business, neglecting the vendor master file is.
White adds that the back office is important – especially for bigger companies that have some level of automation – because it feeds into every other system driving the organization, including ERPs and other financial systems. That vendor data underpins secure, accurate transactions.
White adds color, saying, “For instance, on the vendor side, if you don’t have correct payment addresses, you’re sending payments to the wrong area. If you don’t have their legal name and EIN right, you’re issuing 1099s that may not be accurate.”
These are not small things. In fact, they can add up to pretty big problems – and costs.
White also talks about the patchwork of employees that can sometimes helm the vendor desk. In other words, there can be a lack of ownership. Without a finite group of trained folks who understand the ins and outs of the organization’s financial databases, there can be too many untrained cooks in the kitchen.
Some organizations forgo training a select number of employees to manage and become experts in ERP operations, for example. Instead, many people across the company have to collect vendor data, which can lead to inaccuracies and mistakes. As a result, the organization is working with bad data and usually has no documented process to go back and fix it easily.
This can lead to loads of wasted time, and, more importantly, wasted money.
White offers real-world examples from several of her previous companies where inaccuracies with vendor information led to checks being issued improperly and never getting cashed by the intended recipient.
There are other consequences as well: when White arrived at Clean Harbors, the company was regularly levied B notice fines (well into the six-figure range) from the IRS for 1099s not being issued properly. The result? Wasted money, and tons of wasted time.
White says having a partner to help clean up their database was essential to the functions of her department. (Follow-up disclosure: that partner 🤝 was PaymentWorks.)
When White initiated a cleanup of the company database, the ROI was immediate. The organization reduced fraud right away. Additionally, the fines and penalties for improperly-issued 1099s dropped to zero. Let me type that again: ZERO.
But another element of the ROI was a bit more surprising: a renewed ability to secure favorable insurance.
White discusses how the annual insurance review played out. Specifically, White says her team presented their due diligence efforts related to vendor management. Since they were able to deliver a response outlining their best practices and how they conducted due diligence (which we have a template for here), the presentation went off without a hitch. In fact, they aptly showcased that they understood the problem, which allowed them to keep their premiums low.
“With risk prevention and being able to show our insurance companies that we had due diligence in place, that really did help [our negotiations],” White said.
White covered several best practices for managing your suppliers and vendors – and the benefits can’t be overstated. Elevating the vendor desk’s role to something more strategic can help your organization, control and reduce costs, minimize third-party risks and optimize payments.
For example, what if you discovered that paying by check was costing you more money than it’s worth? Our own Grace Mabie talks about what this looks like in action:
What else can you achieve by focusing on a smart vendor management strategy? More specifically employing a vendor management strategy backed by automation?:
As Grace points out, this is a win for any organization. It’s well documented that moving from checks to electronic payment methods saves money. It also can earn money in the form of rebates for virtual card payments. By automating manual vendor onboarding tasks, your team can focus on optimizing your payment methods by moving vendors to check and virtual cards right at the time of onboarding. With electronic payment preferences committed to at the start of the relationship, not a single invoice will need to be paid with a check. The upside is immediate.
With the right vendor onboarding and management platform, you can thwart maverick spend before it happens. By aligning vendor selection with a vetting process, you can funnel spend towards approved and onboarded vendors rather than adding additional ones. With this, you gain insights into costs, elimate further risks and have control over payments. To sum up, it reduces manual labor and allows the vendor desk to be part of the strategy to focus on utilizing existing strategic vendors. This can only lead to positive business outcomes.
Automating sanctions and debarment list checks removes an enormous burden from your team, clearing them to ensure other important vendor-related compliance policies are met. With everything from conflicts of interest statements to certificates of insurance to documentation for historically underutilized businesses as part of a vendor compliance plan, every bit of time saved impacts overall success.
These are just three of the many areas in which your organization can benefit from a thoughtful vendor management strategy. It may take a village, but the results are well worth the effort.
White covered the gamut of vendor management strategy in our conversation — from using the right resources to the importance of clean vendor master data. The truth is that your vendor management strategy will never be complete unless you have the right tools in place to help you build up a solid foundation. That starts with vendor onboarding and reverberates through everything else the vendor desk touches.
To sum it up:
Automation is a staple for vendor management. Firstly, it checks off all of the bullets above. Secondly, it improves efficiency while reducing errors and costs. This means fewer resources to do the same work without increased risk.
As a result, your vendor desk folks can put on their strategy hats and focus on being more strategic.
And being more strategic looks like this:
Personalizing vendor onboarding – When vendors take ownership of their own onboarding, it frees you up to enhance their experience while also closing data gaps.
Stopping problems before they start – Better visibility with centralized vendor data means you can monitor and analyze operations in real time and be proactive in risk mitigation.
Tracking vendor performance – Strategic vendor management means setting up vendor KPIs (product/service quality, vendor availability, vendor compliance, market competitiveness, etc.) to track the success of your vendor relationships.
A strong vendor management strategy allows you to make the most of your relationships with suppliers while reducing the chances that something goes wrong. It may not always be calm seas, but the right strategy backed by best practices and automation can help you right the ship and carry on with your business.
If this episode doesn’t get you pumped about creative ways to improve vendor management strategy, we have something that might.
It’s time for everyone to come together in honor of one of the most important, usually under-recognized roles across industries: vendor management.
How? Join us in observing Vendor Management Appreciation Day (VMAD)!
VMAD is a brand-new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.
We’ve been releasing gifts each month to help you supercharge your vendor management efforts. We’re also planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.
Learn more here, and grab some free vendor management goodies.
Explore our blogs below. They’re filled with action items you can implement right away.