Three Things You Don't Know About Vendor Onboarding Platforms

by Angela Sarno

VP Marketing

Three Things You Don’t Know About Vendor Onboarding Platforms

When it comes to vendor onboarding processes, you really only have three choices: manual entry, software or a service provider. Making the wrong choice can be costly for your organization.

The easiest path often (mistakenly) ends up with an organization using whatever bolt-on vendor onboarding portal comes with their ERP implementation. If this is you, I’m here to tell you to proceed with caution. These portals are typically static, rigid tools. Likewise, they usually don’t allow for any type of customization based on the needs of your vendors or your organization.

These portals usually have one-size-fits-all vendor forms and little to no organizational visibility regarding the status of vendor onboarding or payments. Additionally, they aren’t well-suited to updating existing vendor information in the very ERP they are built for!

The bigger issue, though? They don’t generally authenticate the validity of any of the submitted vendor data. And none of them guarantee the vendor’s ownership of the submitted bank account credentials.

In other words, they can actually create a whole lot more problems than they solve! Subsequently, they magnify the burden on vendor management professionals who already have their hands full. In a recent podcast with us, Jens Brown of Huron put it aptly:

It’s surprising how inflexible and opaque some of these tools are. And since you might not be aware of what you’re getting (or missing), we’re going to walk through three things you (probably) don’t know about vendor onboarding platforms.

#1. Bolt-On Portals Are Not the Same as Vendor Onboarding Platforms

— One-size-fits-all

— No data verification

#2. Third-Party Bank Verification Only Goes So Far

#3. Vendor Onboarding Processes Need Airtight Tracking & Reporting and Need to Work for ALL Vendors

— Configurable approval workflows

— Vendor visibility

— Existing supplier updates

A Solid Vendor Onboarding Platform Leaves Nothing Unaccounted For

— Invitation only and invitation approvals

— Configurability and audit trails

— Continuous, real-time compliance

— Improved payables strategy

— The ability to shift the risk

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#1. Bolt-On Portals Are Not the Same as Vendor Onboarding Platforms

One-size-fits-all approach

While most ERPs have a bolt-on supplier onboarding tool, most of them miss the mark in a big way. For starters, very few of these tools are dynamic. In other words, you’re getting a one-size-fits-all approach to vendor onboarding.

For example, the one-time payment of $500 to the vendor who completed a small project is treated the same as a foreign conglomerate vendor that you pay tens of thousands of dollars to regularly. They will both be asked to fill out the same information.

This type of broad, cover-your-bases paperwork can be particularly vexing to individuals and small business vendors. These folks will likely be asked questions that are confusing or simply don’t apply to them.

As a result, you’ll likely experience a huge influx of inbound inquiries to your vendor desk asking for help and clarification. (Yes, your vendor desk is also a ‘help’ desk!)

No data verification

In addition to being static, most of these tools have little in the way of data verification integrations. In short, you’re unable to automatically verify the data that the vendor enters.

This type of “vendor portal” is nothing more than a really expensive PDF – a PDF that someone from your team will have to go through line-by-line to validate. That validation process typically involves manually punching that information into a variety of third-party resources like the IRS Tax ID check to confirm the details.

Why does that matter? Firstly, these types of manual tasks are a major time and resource drain on an organization – and on the vendor desk. And as Jens Brown points out, we’re already asking way too much of these folks:

Secondly, this type of verification obscures visibility. How? It requires the vendor desk to go outside of the vendor onboarding portal. As a result, the audit trail and visibility into the vendor’s onboarding status are lost.

What’s more, these supplier onboarding portals do not actually warranty the validity of the information. So even if you’ve collected all pertinent information with your expensive PDF, and your employee has diligently fact-checked everything against third-party sources, AND you have documented this audit trail… if your employee somehow got tricked by a fraudster? It’s still your problem. A big one.

#2. Third-Party Bank Verification Only Goes So Far

If you are lucky enough to have a vendor onboarding platform that integrates with The Early Warning System (EWS), you have a head start on verifying your vendor bank account data. EWS is a popular tool that verifies that the account you intend to pay is linked to your vendor’s confirmed tax ID.

Since EWS covers roughly half of US business banking accounts, it’s a really good start to verifying vendor bank account data. But you’ll still need another way to verify bank accounts that fall outside of EWS.

Here’s a note on EWS: we love that it does an amazing job of quickly separating the wheat from the chaff. You will know in a second if the bank account has been confirmed or not by running the information against their database. Since it covers about 50% of domestic business bank accounts, it’s able to eliminate 50% of the manual work your team needs to do to verify bank accounts.

But what do you do with the other 50%? If you don’t have anything to create 100% coverage for bank verification, you’re stuck in a lurch.

**#3. Vendor Onboarding Processes Need Airtight Tracking & Reporting and Need to Work for ALL Vendors**

Configurable approval workflows

True vendor onboarding platforms offer configurable, approval workflows that are triggered by specific vendor inputs. Since your vendor onboarding reporting process is one of the most risk-prone vectors in your entire business organization, this should be a key feature. However, many supplier onboarding solutions don’t have configurable approval workflows that serve as an audit trail.

This is important for several reasons. Firstly, if something goes wrong, no one has a clear picture of where the vendor is in the onboarding process. You’re also left without a documented history of who approved this vendor, using what information, and when. This leaves your organization vulnerable to repeats of this exact same issue in the future.

Secondly, insurance companies are increasingly focused on the precautions and processes vendor teams use to onboard vendors and guard against fraud. Organizations that lack documentation may find themselves in the difficult situation of having claims denied – or not even being able to get coverage in the first place. (If you aren’t sure where to start, we co-authored with Chubb a great template.)

Vendor visibility

Visibility is an underrated functionality. Think about this: how many hours are wasted by your team answering questions from vendors and internal stakeholders that start with the words “Where’s my ____?”

You may not even know (which is why we strongly recommend doing an audit to see how much time is spent clarifying and informing). If your supplier portal doesn’t clearly track the onboarding and payment status, your team is definitely wasting time answering these questions instead of being proactive and adding value.

Existing supplier updates

Don’t underestimate the number of times each and every day you will need to make updates to existing vendor information. Look under the hood to really examine how that solution that came with your ERP handles updating information. Often, they only provide a single supplier onboarding input that is not adaptable to handle existing supplier updates.

In other words, if an existing supplier wants to change a single piece of information, you’ll be forced to override the original data or create a duplicate vendor record, even if all they needed to do was replace one tiny piece of information. The result? Messy vendor data and a messy vendor master file.

A Solid Vendor Onboarding Platform Leaves Nothing Unaccounted For

Lots of solutions may call themselves “vendor onboarding platforms,” but few truly fit the bill. Most solutions are simply portals – a doorway that allows you to register new vendors without any of the needed functionality that enables you to control the inputs, garner insights, guard against fraud, and enhance your payments strategy.

When you really have a vendor onboarding platform, you will see it serves as a vendor onboarding hub. A hub has spokes that enable instant insights, streamlined communication with vendors, inherent fraud protection, data verification integrations, and built-in audit trails. To help you separate the good from the bad, we’ve put together some functionality to look for when exploring vendor onboarding platforms:

Invitation only and invitation approvals

Vendor onboarding platforms should streamline the onboarding process, not create additional issues, redundant vendors, and tail spend that’s impossible to track. A solid solution will offer invitation workflows that ensure onboarding is complete before any work commences or the product is delivered.

The value: Eliminate maverick spend and channel usage to already-vetted and approved vendors.

Configurability and audit trails

With automated workflows, it’s easy to move from one approver to the next, with time stamps for each approval. Top-tier vendor onboarding platforms allow you to set specific views and permissions for each role so sensitive information remains secure.

And a platform should automatically create an audit trail with timestamps of approvals, returns, and rejections. For example, the PaymentWorks Onboarding Tracker offers ‘at-a-glance’ visibility to all interested parties (check it out below!).

The value: Automated, trackable onboarding means enhanced visibility, fewer phone calls and email inquiries, and more favorable insurance coverage.

Continuous, real-time compliance

It’s not really compliance unless it’s done in real-time and continuously. This applies not only to tax and address checks (which should be automated and provide clear ‘valid’ or ‘invalid’ responses, like PaymentWorks does).

Sanctions lists get updated regularly, so you need to be sure that changes trigger an update on vendor records and a new approval workflow. This video paints a clear (and tragic!) picture of how this can go sideways:

As a point of reference, PaymentWorks saw almost half of the payees on our platform – to the tune of 256,493 vendor updates (according to PaymentWorks Database Statistic 2023)– using it to update their information on a regular basis. This can indicate a bank or address changes, but also when a sanctions status changes. It’s a testament to just how quickly vendor master data can get out of hand and why a living, breathing vendor master – that’s compliant – is critical.

The value: Knowing that all onboarded vendors are in compliance with the federal sanctions list – and having the audit trail to prove it. Eliminate manual processes associated with running sanctions checks with each issued PO.

Improved payables strategy

The right vendor onboarding platform will help you strengthen your payable strategy by marrying it to the moment of onboarding. This allows the organization to convert the majority of vendors to electronic payment types and drive preferred payment methods when vendors onboard. It can also impact and increase virtual card payments and rebates by continuously enrolling new vendors at the most opportune moment- when they are onboarded.

The Value: Continuously convert to electronic payment types, increase rebate revenue and achieve cost savings from eliminating paper checks.

The ability to shift the risk

Perhaps one of the most compelling features of a great vendor onboarding platform is a warranty that protects your organization from fraud losses. How does that work? When vendor banking risk is assessed at onboarding – and continuously up to payment time – everyone can rest easy that all bases are covered.

The PaymentWorks Vendor onboarding platform offers an “okay to pay” status, which triggers fraud indemnification. In other words, it’s not your problem if fraud happens after this point. Better yet, this type of best practice makes you more appealing to insurers, who can often offer more favorable coverage because of the automatic due diligence you have in place. Ambien’s got nothing on the kind of restful sleep you’ll get knowing you can switch to ACH payments safely.

The Value: Better protection against fraud, better insurance coverage, better sleep!

Get Ready For Vendor Management Appreciation 2024

If you liked learning three things you didn’t know about vendor onboarding platforms, stick around. We’ll be covering much more than that on the journey to Vendor Management Appreciation Day (VMAD) 2024.

It’s time for everyone to unite in honor of one of the most critical, under-recognized roles across industries: vendor management.

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

We’ve released 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.