Vendor Onboarding Trends in 2023: Prediction #3

by Angela Sarno

VP Marketing

Prediction #3 in Vendor Onboarding for 2023

The Importance of Vendor Management Will Matter to the Entire Organization

Today’s third and final 2023 vendor onboarding prediction harkens back to my original beef in our first prediction blog.

Simply put, vendor management doesn’t get the respect it deserves across the entire organization.

Too often, the work being done to ensure vendor payments and compliance is seen as a logjam to business. It’s not viewed as the strategic support function that it truly is.

Let’s go to the illustration below.

The Vicious Cycle of Consequences of a Manual Payables Strategy

The PaymentWorks team created this image to illustrate the foundational issues that exist in almost every vendor management strategy we see.

These issues make it harder for procurement and accounts payable teams to convey the importance of vendor management throughout the organization.

Thus, the cycle continues. The vendor desk continues to go unnoticed and underfunded. Individual staff members are left to handle a near insurmountable load of manual work themselves.

Like clockwork, holes in the manual vendor management process continue to appear. Then, the entire organization experiences continued lack of efficiency. Additionally, the risk of B2B payments fraud and other compliance issues increases.

And the cycle goes on.

ERP Vendor Master Data BEFORE Paymentworks

Garbage In = Garbage Out

If your vendor master file is built on a crappy foundation, then a lot of garbage is going to make its way in.

When garbage makes its way in, garbage then feeds your P2P systems, your business processes and your functions. Yes, your entire organization is affected by garbage input.

Ensuring the vendor master data is pristine is a big job. Furthermore, it’s complicated by multiple pressure points around compliance and preservation of working capital.

Look again at the illustration. Can you relate to any aspects pictured?

You may have a broken foundation that lets in all sorts of information that may or may not be accurate.

This bad data impacts all aspects of your department, and has serious organization-wide implications.

Risk. Bad data affects documented compliance for insurance needs
Finance. Your organization may have trouble reporting and managing cash flow accurately.
Procurement. It’s easy for unreliable data to muddle managed vs maverick spend.
External Compliance. Unreliable data creates uncertainty about doing business with anyone on a sanctions list.
Internal Compliance. Insight into diverse and ESG spend becomes unclear.
Business Units. Your individual business units can feel confused about vendor contact data.
HR. Unreliable data makes it harder for HR staff to determine contractor vs. employee status.

There are many other ways that a faulty vendor management foundation impacts your organization. These are just a few.

And here’s the thing. No single person is responsible for the foundation of your vendor management strategy.

Rather, strengthening your foundation is a team-wide, department-wide, and organization-wide effort.

To sum up, many people, processes, and products/technologies are required for secure, compliant, and profitable vendor management strategy.

It’s Time to Prioritize the Vendor Desk

Review the list of the ways that unreliable data affects your organization. Think about who you have tasked with making sure your data is true and accurate.

Ask yourself and your team the following questions:

First, what tools have you provided or have been provided with to improve the quality of your data? What support do you provide or have been given?
Second, does the person responsible for data input understand the business implications organization-wide of good vs. bad vendor data?
Finally, let’s be more blunt. Have you invested proportionately in training and tools to make this person a success? Alternately, has your leadership invested in your training to help your team be successful?

While these questions are rhetorical, I think I already know the answers,. They aren’t positive.

The majority of finance and procurement teams also know the answer too. They know the person charged with gatekeeping the financial system is usually left to sort through vendor onboarding processes and procedures alone.

Oftentimes, this person has little clarity about what is at stake, and even less support to ensure they get each piece of the data exactly right. Not to mention they have a ton of work on their plate. They most likely even take work home with them and on vacation. It’s no joke.

Finance and procurement teams know these people are under enormous pressure to move as fast as possible, while also being as accurate as possible.

As a result, a Sisyphean task faces your staff. The boulder grows bigger and the hill steeper with each passing day.

Begin to Focus Your Team and Organization on the Importance of Vendor Management

We’ll end our 2023 vendor master predictions series with a challenge to you:

First, look at what you are asking of your vendor desk personnel.
Then, ask yourself these questions. Is what you have asked of them matched by their salary? Their decision-making authority? Their organizational-impact?
Finally, break down your staff’s compensation into an hourly rate. Is that rate commensurate with what you ask them to do every day? Research shows that most vendor desk staff are paid like a Taco Bell employee. Just ask Debra Richardson, AP vendor setup and maintenance expert.

More than likely, it’s time to re-think your investment in the management of your payables strategy.

Your entire organization depends on getting it right.

Action Items to Strengthen Your Vendor Management Strategy

Not sure where to start when it comes to creating a better foundation for your vendor management? Here are a few things you can do right now.

First, read and share case studies of successful vendor management strategies. Start to envision your team and organization WITH the ideal payables strategy in which everything is optimized. It is possible and many organizations are working successfully towards it. Just ask the accounts payable team at the University of Tennessee System. They’re sleeping much better at night after automating their processes. Also, Johns Hopkins University and Stephen F. Austin State University can inspire your team.
Next, establish a team motto to keep you focused. We recommend this: The ideal vendor management strategy IS possible. Believe that it’s true. Brainstorm with your team about the tasks you’ll be able to do, the data you’ll be able to collect once your strategy is fully optimized. Have fun envisioning this ideal state in payables. Get inspired by the University of Virginia.

Review and update vendor contracts. Regularly review existing vendor contracts. Identify any outdated terms or clauses that need revision. Consider consulting legal experts to ensure compliance with current laws and regulations. Update contracts accordingly to reflect the evolving needs of your organization.
Tweak your due diligence process. Perform a comprehensive evaluation of potential vendors before entering into agreements with them. Assess their financial stability, reputation, and compliance with relevant regulations. Verify their certifications, licenses, and insurance coverage to ensure they meet your standards.
Review your current vendor performance metrics. Are you capturing the information you really need and want? Define key performance indicators (KPIs) and service-level agreements (SLAs). Valuable metrics include delivery times, quality, customer satisfaction, and adherence to contractual terms. Regularly review vendor performance and address any concerns or issues promptly.

Additional Action Items to Prioritize the Importance of Vendor Management

Additionally, find more effective methods of communication and collaboration. How do you communicate with your vendors right now? Are your current methods actually helpful? If not, how can you make your communication more efficient for both you and your vendors? Clearly communicate expectations, objectives, and performance standards. Regularly engage in constructive dialogue to address concerns, provide feedback, and drive continuous improvement.
Leverage technology and automation. It’s 2023 and time to automate. Consider implementing vendor management software or platforms that streamline processes, automate vendor onboarding, enable digital document management, and facilitate compliance monitoring. Digital supplier onboarding enhances efficiency, accuracy, and data security while reducing manual errors and administrative burdens.
Last but not least, get feedback from internal stakeholders: Engage with internal stakeholders. This includes end-users, department heads, and finance colleagues. Gather feedback on vendor performance and satisfaction. Their insights can provide valuable input for vendor management improvements. Plus, engaging various stakeholders builds an organization-wide culture of awareness of and appreciation for the importance of vendor management. This will make it easier for your team to get buy-in from leadership and other departments to revamp vendor management processes.

Want More Insight Into the Importance of Vendor Management?

We have a ton of additional resources for you. Share these with your procurement and accounts payable staff, leadership team, and departments throughout your organization.

Remember, the goal is to cultivate a culture where the role of the vendor desk is truly appreciated.

The only way to do that is to make your entire organization aware of everything that the vendor desk does, and why it’s crucial to everyone’s safety, cash flow, and efficiency.

Vendor Onboarding Trends in 2023: Prediction #1

Vendor Onboarding Trends in 2023: Prediction #2

Key Vendor Tips and Takeaways–From the Experts Themselves

B2B Payments Fraud Fraud in Times of Chaos

How the University of Tennessee AP Department Sleeps Better After Implementing PaymentWorks