5 Things to Know About Vendor Onboarding Software
All the things you need to know about vendor onboarding software
All the things you need to know about vendor onboarding software
Vendor onboarding software can bring efficiency and security to the chaos of highly manual vendor management. But this only works if you choose the right vendor onboarding software. There is such a dearth of products on the market all promising “automation” and “digital transformation,” but if you just automate your intake form, then all you have is a really expensive PDF. You haven’t actually solved the problem of vendor onboarding.
Even organizations with clear pain points can get caught up in the mysticism surrounding vendor onboarding software. How do you know what makes an exceptional solution versus a basic one? What’s the best way to evaluate tools? How can you adequately address all your challenges with the software you choose?
Yes, you can close your eyes and throw a dart at the wall to see which automated solution it lands on. However, not all vendor onboarding software is equal. To help you better differentiate between tools that market hard and those that work hard (so you don’t have to), we’ve put together a list of five things you need to know.
Vendor Onboarding Software: The Basics
The Specifics: 5 Ways Vendor Onboarding Software Solves Common Problems
#3. Approval workflows and audit trails
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If you’re looking for vendor onboarding software, you probably have some pretty obvious pain points. You may want to streamline compliance, reduce hard and soft costs, or guard against vendor fraud. Automation can help across the board, reducing (if not eliminating) time-consuming, risky manual tasks.
Automating the vendor onboarding process can also enhance communication and coordination across other departments like finance and procurement, ensuring everyone is in the loop.
Many pain points can be solved with automation. Still, it’s critical to make sure whatever tool you choose also offers functionality to help you tailor the tool for your organization and accomplish related goals. For example, consider:
Vendor onboarding software should allow you to create and customize workflows that suit your particular onboarding requirements. In short, it standardizes the onboarding process according to your organization’s unique needs.
You should be able to only send to compliance the vendors that need that check, for example. Don’t clog your workflow with folks who do not need to be involved with that vendor. The benefit is increased efficiency with fewer errors.
Software should ensure compliance at the federal, state, local, and internal levels. This should include regulations, laws, and procedures that are relevant to your industry and company. Compliance is often burdensome, so automating certain elements can save time, money, and headaches.
An obvious and painful example is checking sanctions lists with every PO issued. Everyone is supposed to do this, almost no one does because it’s so cumbersome. However, doing this also protects the organization from reputational and financial damage resulting from non-compliance or legal issues. (Pssst…if you’re still doing this manually, check out our handy framework here).
Organizations often operate within an alphabet soup of systems. Between CRMs and ERPs, it’s critical that your vendor onboarding software integrates smoothly with existing technology. This can ensure all systems reflect the same (auditable!) data and that nothing falls through the cracks during set-up. Bonus? It allows different departments to communicate more easily within the procurement process.
A great vendor onboarding software helps (often decentralized and siloed) organizations get everything in one place. Between centralizing vendor-related documents and creating audit trails, the right solution should make it easy for the right people to access the right things at the right time.
Vendor banking verification is a major pain point for many organizations. In addition to being time- and manual-task-intensive, it opens the door to fraud. Traditionally, the vendor desk is responsible for sourcing vendor information and manually entering it in. This usually includes voided checks, account information on bank letterhead, phone calls to confirm information, and multiple levels of internal approvals to push everything through.
We’re out of breath just thinking about it.
The inefficiencies in the process are clear. But what about the potential for fraud? Using phones and email for vendor verification opens the door to vendor impersonation fraud. It’s a huge problem. Business email compromise (BEC) – just one sliver of fraud that is possible – accounted for $50 billion in global losses between 2013 and 2022.
It gets worse.
As technology evolves, fraudsters do, too. AI and deepfakes are adding another layer of sophistication to common social engineering scams and costing organizations like yours millions. Take, for example, the recent case of social engineering that caused a finance worker to be duped into shelling out $25 million in company funds.
Think that won’t happen to you?
This poor person thought they were speaking with their chief financial officer because they saw the CFO on a video call. They also saw many other familiar faces on this call, creating the realistic illusion that they were speaking with known folks. So, the funds transfer that the CFO requested – while outside of the normal process – seemed a little less irregular.
Then poof! $25 million gone in the wind.
Solid vendor onboarding software will automate the vendor verification process. Better yet, it should put the onus on the vendor to input information. Why? Procurement consultant Jenn Glassman talks through why this makes sense:
All updates and change requests happen through the software, removing the possibility of vendor impersonation via emails, phone calls, or deepfake video calls. The software vets the submissions, removing the possibility of human error.
Compliance and security are burdensome, often manual tasks that require a ton of time and a steady hand. The vendor desk is typically responsible for verifying tax IDs, contact information, and addresses. Moreover, they usually have to do this with third-party tools that don’t integrate, adding more manual tasks into the mix.
On top of that, as we mentioned up top, the vendor desk has to run vendors through sanctions lists at the time of onboarding and prior to each PO issued— for the life of the vendor relationship. And if you guessed that’s also a manual process, you’d be right.
Just like the vendor verification we described above, the vendor desk often relies on a wish and a prayer that the banking information is legitimate and that everything else checks out. As our partner at Huron Jens Brown puts it, we’re asking a lot from the vendor desk:
It’s a recipe for sore fingers – and potentially devastating fraud – if (ahem, when) mistakes happen.
The right software allows organizations to automatically stay compliant with ongoing monitoring for regulatory and payment fraud issues. With vendors entering their own information (including mailing addresses and tax IDs), the software should automatically run checks on the information to confirm whether or not it is valid.
Sanctions lists can be checked continuously, triggering updates and new approval workflows as needed. PaymentWorks goes so far as to complete a banking risk assessment within the platform, moving the fraud liability from your organization to PaymentWorks.
Many organizations rely on multi-level approval processes, which seem inherently secure and error-proof. However, they can actually complicate things. Relying on multiple humans for approvals introduces the possibility of human error. You also have to consider how office politics, sick days, and retiring employees impact the approvals process and the related audit trails.
Next, let’s talk about how approvals get tracked. There’s a ton of spreadsheets and emails floating around the office. Vendor information is drifting from person to person (even those that don’t need access to it). And there’s no way to keep track of each approval or what happened when. These paper trails are often inaccurate at best and a security risk at worst.
So, yes, approvals can enhance control. But they also introduce delays, administrative burdens, and the potential for internal conflicts into the scenario.
The right solution solves all of these problems from the start. Firstly, when all documentation and approvals run through the software, it’s impossible for any data to get into the ERP without a digital “paper trail” of who did what and when.
A great platform will allow you to set fine-grained permissions for specific roles so approvers and anyone else involved in the process only see what they need to see. You can also remove the uncertainty about how responsibility waterfalls if/when someone is out or leaves. Simply set multiple people per role to eliminate logjams and keep things moving.
All of this enables you to simplify processes while maintaining an audit trail of each touchpoint along the way. This type of controlled process and due diligence is exactly what insurers look for when determining coverage eligibility and rates. (Proof point: Check out our co-authored piece with Chubb.)
Vendor data updates: they happen, and you gotta do ‘em. But they also represent another area where fraud can weasel its way in if your process relies too heavily on manual processes and third-party verification tools.
Vendor change requests often come in through unsecured channels (email, phone, deepfake video conference calls…). It’s incredibly difficult to know with 100% certainty that the request you’re receiving is legitimate if this is your process.
Moreover, manual processes also mean that all approvals for changed info are tracked outside of the ERP, usually in spreadsheets and email threads.
Then, there’s the issue of how the new information gets entered. A request to update a remit address can often create new vendor records, leading to duplicates in the master file. Do you have multiple vendors with the same tax ID? More duplicates.
On top of all of this, manual processes mean no audit trail and no way to track internal controls and verification processes.
The right vendor onboarding software eliminates the dilemma of duplicates with choices triggered by existing tax IDs. First, vendors can submit their own updates through the system, which could trigger a new approval workflow. It would also trigger an automatic compliance and security check based on the newly submitted information (and vice versa, so if a vendor’s status on a sanctions list changes, it would trigger a vendor update).
And let’s not forget audit trails (can you tell we’re big fans?)! All information is logged in a digital trail before it goes into the ERP, so you know who approved what and when. Layer in multi-factor authentication, and you will make it nearly impossible for fraudsters to commit account takeover, keeping payments safe and secure.
One of the most exciting things about using vendor onboarding software is the ability to marry your payables strategy to your vendor onboarding process and convert vendors to electronic payment types.
Checks are so last year (really, they’ve been out of vogue for a bit now). They’re also risky. And expensive. Huron consultant Snow Rutkowske sums it up nicely:
Yet most organizations are still paying the bulk of vendors by check. Incomplete contact information plays a big role in that, making it difficult to have a conversation with vendors about moving away from checks. And bank calling campaigns to move vendors to virtual cards are often ineffective and completely disruptive to your business.
As a result, organizations lack a means to implement a payment strategy effectively. There’s no way to track and report on payments accurately, so it gets pushed to the wayside, even though so much more is possible.
Using solid vendor onboarding software makes it so much easier to drive preferred payment methods when vendors onboard. All you have to do is configure your onboarding form to feature favorable payment terms for your preferred payment types. Then, you can earn rebate revenue from the very first invoice paid, or at the very least, stop paying via costly check
This type of platform will simplify your ability to convert the majority of vendors to electronic payment types. You can increase virtual card spend (and rebates) with ongoing digital enrollment. And to top it off, you can monitor and adjust your payments strategy with insights from dashboard analytics.
Give your dart game a rest. The only solution that will stick is one that you thoroughly vet and align with the unique needs of your organization.
Good news! The Vendor Management Appreciation Day (VMAD) celebration continues in 2024. It’s our way of creating one giant love letter to our favorite people: vendor managers!
Why? Because we know it’s one of the most critical, under-recognized roles across industries.
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.
Explore our blogs below. They’re filled with action items you can implement right away.
Vendor Management Automation: Blueprint for Success
Three Things You Don’t Know About Vendor Onboarding Platforms
Three Things Going Wrong With Your Vendor Onboarding Process
Vendor Verification: How NOT to Do it and What to Do Instead
We’d love to walk through your process with you and talk about security, compliance, efficiency and sleeping better at night.