Vendor Management Automation: Blueprint for Success

by Angela Sarno

VP Marketing

Vendor Management Automation: Blueprint for Success

It’s the second week in January – too soon to talk about vendor management automation? I think not! By now, the confetti has settled, and most of us are back in the office getting things in order for the new year. While you’re catching up on emails and creating your 2024 plans, I have a question for you: Where do you want to be a year from now?

Whether or not you believe in New Year’s resolutions, you probably have some goals for vendor management operations at your organization. So what are they?

It’s an important question to answer as soon as possible. Why? Because what happens in a year if nothing changes now?

Change requires action and impactful action requires a plan. Whether vendor management automation is your goal or you simply want to sleep better at night, we have a plan to help you get there.

It starts with building a business case for what the status quo costs your organization. It’s the fodder you need to get leadership’s attention and to start making impactful changes. But change doesn’t happen overnight, which is why we’ve outlined four key questions to help you make the most of the new year. Ready?

Your Vendor Management Process in 2025: A Prediction

Making the Case for Vendor Management Automation: The Numbers in Reverse

Clearing a Path to Vendor Management Automation

#1. What’s your process?

#2. What’s your culture?

#3. Is compliance a priority?

#4. Are you set up for year-round success?

Vendor Management Automation Covers All the Bases

Get Ready For Vendor Management Appreciation Day 2024

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Your Vendor Management Process in 2025: A Prediction

I’m not really big on New Year’s resolutions, even though the last one I made, which was 21 years ago, turned out very well. (That’s another blog more suitable for a website focused on personal relationships.) But lately, I find myself thinking about the fact that before we know it, it’s going to be January 2025, and your vendor management process will either be:

The same
Worse
Better

Whatever the outcome, it won’t be by chance. It will be by choice. And know it or not, you are making this choice right now.

Modernizing vendor management

For several years now, vendor management automation and digital transformation have been on the minds and in the business plans of procurement and finance folks in all industries of all sizes. However, the actual onboarding and change management processes around actually collecting and inputting data, aka, vendor management, stubbornly remain manual.

It seems counterintuitive (to me!) that organizations invest so much time, money and effort into all sorts of automation platforms everywhere in finance and P2P when those platforms rely on data that is manually typed into the system. In reality, all this automation is built on an incredibly shaky foundation. A foundation built with the literal fingertips of a human sitting at a computer, typing it in.

A vendor management resolution

So I am going to make a 2024 resolution right here, right now. I resolve to focus all of my professional attention on getting the people and the processes of vendor management a seat at the table in 2024. To shine a light on the absurdity of not investing in this function. Showing organizations just how much is resting on this process and how investing in P2P and finance digital transformation without starting with vendor onboarding automation strategy is the epitome of a cart-before-horse mistake.

So let’s make a resolution here together, shall we? Let’s resolve that in 2024, vendor management will be at the front of the line when your organization plans for automation and digital transformation.

And how are we going to do this? We’re going to flip the business case on its head by building a case for the status quo — a business case for doing nothing different.

A business case for continuing to manually onboard vendors.

Making the Case for Vendor Management Automation: The Numbers in Reverse

A great place to start when trying to elevate the vendor management automation conversation is by asking, “What is the cost of NOT investing in vendor management automation?”

Yep, you heard correctly. Start by creating a case for not investing. Map out the cost of maintaining the manual onboarding status quo.

After all, that’s just as much of a business decision as choosing to automate.

Doing the math

If you can, use your organization’s data to calculate your ROI. This will paint the most accurate picture of your organization’s performance as it pertains to vendor management. Precision is key, but even ballpark estimates can knock leadership’s socks off.

What’s more, using real data means the business case is more likely to stand up to scrutiny by internal skeptics.

Then, you need to look at how much time all of the vendor onboarding and management tasks take – and how much people are getting paid to do those things. If you know roughly how many vendors you bring on each year, this data will allow you to calculate the annual cost to your organization for new vendor processing.

The calculation looks like this:

Time x Wage x Number of touches = Cost

But don’t stop there. You’ll need to add in the third-party costs from database subscriptions associated with verification and validation!And the time it takes to make changes to existing vendor profiles! And the differences between paper vs. electronic payments!

Tisha Marshall, AP Director at the University of Tennessee System, talks through some other considerations to factor in below:

Laying the groundwork

There’s a lot to consider, I know. That’s why we created this workbook to walk you through each and every step.

It’s worth it, I promise. When you’re finished, you’ll have a very robust business case for not investing in vendor management automation – and what that means for outcomes.

If you don’t follow through on any other resolutions in 2024, follow through on this one. It’s the one that can unlock the possibility of improved vendor management, better outcomes, and the ability to rest easier at night.

Your job’s not done yet, however. Transforming the vendor desk with vendor management automation is not always like flipping a switch. In the next section, we’ll look at important questions to ask as you resolve to make 2024 your best (vendor management) year yet.

Clearing a Path to Vendor Management Automation

Since vendor management automation doesn’t always happen in one fell swoop, we’ve put together some baby steps you can take toward a cleaner, more streamlined process.

Even if you’re just starting the conversation within your organization, there are massive opportunities to improve processes while also helping to make the case for vendor management automation.

Let’s look at a few questions to ask and how you can resolve to provide better answers in 2024.

#1. What’s your process?

Facts: fraudsters love your manual vendor management processes.

Lack of vendor management automation means fraudsters can go wild with spoofing, vendor email compromise, executive identity impersonation, and whatever they think of next. As a result, you end up fighting a defensive war on too many fronts.

The real pain point is vendor additions and changes. Fraudsters are keen on exploiting weaknesses in your process – and they’re patient, to boot. In other words, they have zero problem waiting until the one moment you let your guard down. Then BAM! Vendor payments fraud.

I have good news. Documenting vendor onboarding and management processes can offer some peace of mind when it comes to mitigating risk. It’s also an important step to ensure you qualify for insurance protection as a backstop.

I know firsthand that most organizations don’t have any type of documented vendor onboarding and change management procedures. And creating those from scratch can be a tough ask.

That’s why we put together this Write It Down template to use as a starting point. It will help you gather the right information and the right people to have critical conversations about your current vendor management processes.

Additionally, it will shine light on the efficiency, security, and value of your current vendor management processes, what needs to be improved, and the best way to document and follow your processes.

#2. What’s your culture?

Do you know the two common denominators for successful vendor impersonation fraud?

The organization defrauded had no documented vendor onboarding and change management policy; or
The policy they have documented was not followed.

If you use the Write It Down template above, you’ll have won half that battle. But there’s still a lurking problem tied to culture. If you have a documented vendor management process, but think you might be asked to make exceptions to that process, your culture puts you at increased risk for fraud.

It’s time to have a conversation about that. To help, we’ve put together this Document the Exceptions log book to help you document each time you’re asked to break the process.

Yes, every single time someone – no matter who! – asks you to bend or break the rules, you add it to your log, even if you don’t end up breaking the process. The logbook then helps you identify patterns, which could signal bigger problems – and entry points for fraudsters – down the line.

In other words, the log book helps you document and evaluate evidence that something is not working like it’s supposed to. It could also be that your culture problem has a name, and that name is Betty in finance. Or Carlos in HR. Or Mo in shipping. You get the picture. Documenting these exceptions can strengthen company culture, and your ability to say no.

Listen to Huron’s Snow Rutkowske about her experience having these conversations:

With just two templates, you can cover a lot of ground and get the wheels in motion to better vendor management processes.

#3. Is compliance a priority?

Compliance isn’t necessarily the most fun part of the job. The ease of vendor compliance runs the gamut from “daunting” to “nearly impossible,” depending on the buy-in, tools and systems you have in place.

Moreover, an organization is a living, breathing thing. Rules change. Employees come and go. Vendors change. It’s really hard to stay on top of all those moving pieces and people.

But it’s critical.

Unfortunately, its difficulty means it doesn’t always rise to the level of importance it should during important conversations. As a result, people who need to know don’t always know and things to do don’t always get done.

Guess what we recommend for that? Yep! We built a template so you can create a framework for internal and external vendor compliance. It covers global, federal, state, and local considerations so you can CYA across the board.

There will be some heavy lifting on your part especially when it comes to internal compliance procedures, but our framework comes with samples to get you going.

#4. Are you set up for year-round success?

Everything we’ve described so far will help you build a solid foundation that helps you improve and secure vendor management processes. That said, all it takes is one wrinkle to throw your well-oiled machine out of whack.

For many, that’s tax season. From November to January, many AP and vendor management teams have to scramble to pull together key information, figure out electronic filing requirements, run a bunch of verifications and validations, and make sure the house is in order.

A lot comes at you fast, and it can be time- and resource-intensive. In short, it’s easy for things to fall through the cracks. When that happens, your organization is at increased risk for all the scary things we’ve covered so far (fraud, non-compliance, etc.).

Step one is clean vendor data. It makes it sooo much easier to have TINS and Addresses verified and ready to go. This eliminates a ton of busy work that has you chasing down correct addresses for returned 1099s or 1042s. It also saves you in potential fines from the IRS.

Even with clean data, there are a lot of tasks to keep straight:

Check for # of Reportable Vendors
Using FIRE for Electronic Filing? Get Your Transmitter Control Code (TCC) for FIRE
Using FIRE for Electronic Filing? Get Your Transmitter Control Code (TCC) for IRIS
Check States included in Combined Federal/State Program
Test the Electronic File in Accounting System/ERP
Bulk Upload – IRS TIN Match
…and a bunch more…

Don’t worry! We have a 90-Day Tax Filing Prep Plan to help you get everything in order. It comes with tasks, timelines and resources so you can use it as a quick-reference tool when tax season starts to heat up.

Vendor Management Automation Covers All the Bases

The tools and questions above work for everyone, whether you’re just starting your journey toward vendor management automation or you’re getting close to making a move. And Snow Rutkowske does a good job explaining why even small steps toward automation matter:

That said, nothing beats automation.

Vendor management automation is the gold standard

Decentralized vendor onboarding and management that rely on manual tasks drags everyone down. It’s also expensive, time-consuming and prone to fraud scams. Worse yet, it leaves no room for an effective payment strategy.

On the other hand, vendor management automation allows you to free up departments from time-consuming paper-chasing. Your people can use this new free time to focus on core business initiatives, being strategic, and adding value. Automation also puts control of vendor data in the vendor’s court, reducing errors (and frustration) for everyone.

Vendor management automation also allows you to pay vendors faster and cheaper. Vendors can select their preferred form of payment when they onboard, reducing the need to make changes later. The built-in bonus is that it’s easier to wean vendors off of paper checks and onto EFT payments. Existing vendors can make the switch when it’s time to make changes to their vendor data (e.g., an address change).

Automation streamlines the entire onboarding and payments process from the moment it’s “turned on.” Vendors enter their information, choose their preferred payment method, and are up and running in a short time. Any changes to vendor data are a simple update within the system — sans the lengthy back-and-forth that occurs with a manual process. Better yet, there’s no wondering if a bank account change request is legitimate or a million-dollar sinkhole aka fraud.

The ideal state of vendor management is possible

If this all sounds like something you’d like for your organization, it’s closer than you think. Most of the templates we provided above are stepping stones to vendor management automation. They spark meaningful conversations and can help get leadership buy-in.

Bookmark this blog and use it to guide your process improvements in 2024. Don’t bet on the status quo still working 12 months from now.

New year, new you, new vendor management improvements!

Get Ready For Vendor Management Appreciation 2024

Want to hear another resolution we think is worthwhile? Honoring one of the most critical, under-recognized roles across industries year-round. We’re talking about vendor managers!

The party continues in 2024 as we get ready to celebrate our second annual 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 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.