by Ashley Poynter

Content Manager

Why It’s Time to Re-Evaluate Your Vendor Onboarding Checklist

Have you wondered lately if your current vendor onboarding checklist is up to snuff?

You should be.

In many ways, vendor onboarding is the glue that holds the pieces together, yet it’s often overlooked as an administrative function. In reality, it’s super glue. It’s “super” because it holds the key to strategic vendor relationships that allow the business to run and grow.

As a result, it’s super important to make sure vendor onboarding processes are in tip-top shape. Sure, it prevents things from falling through the cracks. But it also helps to nurture key relationships that are essential to meet business goals.

To help you keep your onboarding processes as seamless as possible, we’ve put together this guide so you can rest easy knowing your bases are covered.

Vendor Onboarding: A Snapshot

Why Vendor Onboarding Needs to Be On-Point

Is Your Vendor Onboarding Checklist Out-of-Date?

Vendor Onboarding Checklist Considerations

How Vendor Management Appreciation Day Can Help

Want Help Aligning Your Teams With Your Vendor Onboarding Checklist?

Interested In Regular Vendor Onboarding Checklists and Tips?

Want Personalized Vendor Onboarding Checklists?

Vendor Onboarding: A Snapshot

Vendor relationships can be complicated. In fact, vendor management is a lot like dating: you get to know one another (vendor onboarding), you develop the relationship and agree on terms that make sense for each of you and you put in the work to keep things going smoothly (vendor management).

Navigating these relationships means keeping a lot of plates spinning. And, of course, you want things to get off on the right foot, which makes vendor onboarding a critical piece of the puzzle.

In many cases, organizations are relying on dated, manual processes to collect and enter information. Worse yet, these manual tasks lack formal systems and processes, making it easy for mistakes to happen and oversights to occur.

In other words, it threatens the relationship.

But the relationship with the vendor isn’t all that’s at stake. Inefficient vendor onboarding processes can also bump up costs, increase the chances for fraud, and put the entire organization’s mission at stake. On a recent episode of our Risky Business podcast, Jenn Glassman helped us put this into perspective:

Automation and a standardized onboarding process can boost efficiency, reduce fraud and enhance the overall performance of your business. Moreover, the insights you’ll be able to glean make it so much easier to ensure your vendor relationships flourish – and that you have the data you need to make better business decisions.

Why Vendor Onboarding Needs to Be On-Point

Vendor management begins with vendor onboarding. This sets the tone for the relationship – and all the subsequent business decisions tied to it.

Inefficient processes can decrease return on investment (ROI) – and increase cost and risk. When your workflows are buttoned up tight, however, you can do the opposite. Whether you use a vendor onboarding checklist, automation, or a combination of both, seamless vendor onboarding can:

Mitigate risk: When you validate and verify vendors correctly while keeping vendors in the loop, the relationship flourishes. What’s more, you can better manage and mitigate risks tied to fraud and compliance.

Reduce internal friction, aka, wasted time: Following vendor onboarding best practices slashes redundancies and makes you more efficient – all while providing deeper insights into spend. As a result, your vendor desk spends less time doing unnecessary tasks, which reduces internal costs. And you can better track purchases to make sure they align with business goals.

Strengthen vendor relationships: Streamlined vendor onboarding makes things easy on both sides. Your vendor knows what to expect around communication and payment and you can be sure your vendors are who they say they are and will provide what they say they will provide. Good vendor relationships help grow the business and prevent unnecessary disruptions.

Affect the bottom line: when you have an automated and controlled vendor onboarding process, you can execute your payables strategy with ease. Want more electronic payments? Present your favorable terms at onboarding time and see the results flourish.

Is Your Vendor Onboarding Checklist Out-of-Date?

Even if you have a vendor onboarding checklist in place, it’s good to revisit it from time to time. People leave, things change, and technology evolves. Updating your vendor onboarding checklist helps you avoid costly mistakes and compliance snafus.

Here are some questions to ask that could prompt a review or revision of your current vendor onboarding checklist:

Do we have a template for documenting procedures for vendor onboarding and change management (No? Try this one)?
Do we have adequate training for vendors on what is needed to onboard or use our vendor onboarding platform?
Do we document exceptions (e.g., all the times the vendor desk is asked to break the process for onboarding suppliers and changing vendor information)?
Do we have a good system for tracking data to see where improvements can be made?
Do we have an airtight staffing plan, including a line of succession and contingency plan for when people get sick, retire, or leave?
Do we have a framework for vendor compliance that includes considerations for federal, state and local regulations?
Do we have a documented (or automated) vendor verification and vetting process?
Have we automated processes to reduce human error and ensure smooth vendor onboarding?
Is our vendor onboarding process integrated with our strategic vendor management approach so procurement is aligned with overall business goals?
Do we have an automated process to guard sensitive information at every stage in the vendor relationship?
Does our current vendor onboarding checklist and process have buy-in from leadership?
- Hint: if not, listen as Snow Rutkowske of Huron speaks to how a solid vendor onboarding checklist and process can help get buy-in:

Do we have a standardized communications protocol for teams and vendors so everyone is on the same page?
Does someone have ownership of the vendor onboarding checklist?

Vendor Onboarding Checklist Considerations

The answers to the questions above should help guide your vendor onboarding checklist. Sprinkle in some best practices and you have a near-bullet-proof vendor onboarding process.

We’ve included a framework for your vendor onboarding checklist below. Of course, you should add items relevant to your unique business and vendors as needed.

#1. Verify the vendor is real

This part may seem easy, but it’s really important to get right. You need to verify your vendor is who they say they are. You might do this via third-party data checks, submitted documentation, references or a combination of means.

The important thing is that you do it and do it well. You want to be sure your vendor is legitimate in the sense that a) they are not fraudsters impersonating a vendor, and b) they can deliver the products and services they offer.

Best practice: The vendor analyst or buyer should confirm the veracity of the request with the internal business owner.

#2. Verify they aren’t already in the ERP

Once you can be sure your vendor is real, you need to make sure they don’t already exist in your ERP. The vendor desk should be able to run a check to ensure that a record doesn’t already exist for the prospective vendor.

#3. Verify they submitted TIN, address and banking info

After vendor selection, you’ll need to outline the steps for collecting their information, verifying that information, and getting the vendor approved. The vendor should be on the same page as your vendor team throughout the process, especially when it comes to information collection. The process should also be as transparent as possible, reducing the number of onboarding status emails/calls your team needs to answer.

Automation can make this process a whole lot easier, because, as Jenn Glassman so eloquently points out, who is better suited to enter vendor information than….the vendor:

But even manual tasks can be simplified if you know what you need to collect. This might include things like vendor business and representative contact details, addresses, licenses, insurance information, and banking details.

Collecting and vetting vendor info is no easy feat. What’s more, you probably use a number of tools to get the job done.

Many organizations use an in-house vendor form (maybe an Adobe PDF that can be linked in an email to the vendor) to collect information. The person doing business directly with the vendor should own this part of the process and be responsible for sending the email with the appropriate link to the right vendor contact. They’re also responsible for verifying that all relevant information is submitted correctly.

To verify US banking information, you can use a tool like Early Warning System (EWS). EWS verifies the account you intend to pay is linked to the confirmed tax ID of your vendor. The vendor desk and/or accounts payable usually handles this step. (Caveat: EWS covers approximately half of the US business banking accounts. You will need another, more intensive, item on your checklist to handle bank account verification outside of EWS.)

Tax ID confirmation can be done via the IRS Taxpayer Identification Number (TIN) Matching service. The vendor desk/accounts payable should check to verify the tax ID numbers.

Best Practice: The person doing direct business with the vendor should send the New Vendor a link to a PDF or other in-house form where they can submit information. This can be obtained from procurement, accounts payable or the vendor desk, which will work in tandem to verify other vendor data.

#4. Verify the vendor isn’t debarred or on sanctions lists

This one’s a big one! Don’t do business with people on bad lists. Every vendor must be checked against denied and restricted lists to avoid and mitigate trade compliance and regulatory risk. In most cases, your compliance manager should own this piece of vendor onboarding.

#5. Verify COI and HUB documents

You’ll also need to verify any certificates of insurance (COIs), which provide proof of insurance coverage. This may vary by vendor, but in some cases, you’ll need to confirm if the required insurance type is carried and the limits of that coverage. Add a step to confirm when the COI expires.

Don’t forget HUB (historically underutilized businesses)! If your organization has goals and commitments regarding supplier diversity, you’ll want to verify whether or not the vendor has obtained HUB certification status. Not only does this help the economic development of minority, women-owned, veteran and physically disabled businesses, but it may be a necessary part of your audit trail for shareholders, investors and boards.

#6. Enter vendor data in the ERP

With any luck, you have documented requirements for the minimum data required to input vendor information into your financial system. This can help you avoid head-scratching moments as you begin to input data.

Don’t forget any optional data that might be triggered by certain criteria. For example, if you’re using federal research dollars to pay a vendor, you may be required to input sanction list status (e.g., OFAC or debarment).

Best practice: Limit the number of individuals who can input or change vendor data in your ERP. This ensures a tight audit trail.

#7. Alert the buyer and vendor that they are ready to go

Congrats! Your vendor has been successfully onboarded and is ready to go. The (almost) final step is to alert the buyer and the vendor that onboarding is complete, a vendor number has been issued, and work can begin.

#8. Enhance audit trails and communication

Collecting information is just one part of the vendor onboarding process. Your vendor onboarding checklist should also include how that information should be routed throughout your organization to ensure all stakeholders have what they need. The vendor desk is the frontline, but other departments will need to approve the submission, for example:

Compliance
Tax
Risk
Treasury

Additionally, you’ll need to establish fluid lines of communication with the vendor. They need to understand how to submit invoices, complete any necessary training, submit or make changes to contracts or terms, and submit and update contact details for company representatives.

A central repository for this information can make data-sharing easy as pie. At a minimum, your vendor onboarding checklist should include flow charts for how and where to share critical information and communicate with vendor personnel.

I cannot emphasize enough how important a seamless vendor onboarding process is for a good business relationship – and strategic vendor management. Don’t skimp on building out this section of your vendor onboarding checklist. Include all the details you need to collect from vendors and the most efficient ways to do so.

Yes, having a thorough, documented vendor onboarding checklist is about crossing your Ts and dotting your Is. But it’s also about elevating the connection between the vendor desk and your organization’s overarching business goals. It’s easier to be strategic in your vendor management operation when the basics are covered. Fewer mistakes + more data = better insights. And better insights mean it’s easier to see the value that vendors – and the vendor desk – bring to your organization.

How Vendor Management Appreciation Day Can Help

Our most exciting event yet is just one month away. While we’re not doing a Times Square Ball drop, we are extending gentle reminders to join us for the inaugural Vendor Management Appreciation Day (VMAD) on December 12th.

We’ll be celebrating the tremendously challenging job vendor management professionals do day in and day out. Vendor onboarding, maintaining a clean vendor master file, and general vendor management are no easy feats.

That’s why we’re bringing everyone together in honor of one of the most important, sometimes under-recognized roles across industries.

Will you join us to celebrate on December 12th?