Guide to Effective Vendor Management< Guide to Effective Vendor Management<

Guide to Effective Vendor Management

What do Nike, Tesla, your hairdresser, and your local grocery store have in common?

They all use vendors. That’s right: Whether a global enterprise or a one-person show, every business relies on vendors to get the job done. 

From your internet provider or coffee supplier to an HR consultant or social media agency, any third party that provides a product or service for business operations is a vendor. And to keep your business running smoothly, you need to manage vendors effectively.

The more vendors you have, the more complex and involved your vendor management process will be. That’s why you should optimize vendor management. Poor vendor management can lead to financial loss, not to mention unnecessary stress that might distract you and take precious time and energy away from more important business issues. 

Choosing high-quality vendors is the baseline for good vendor management. The best vendors are honest, cost-efficient, and reliable. They provide you with the level of service you aspire to give your customers. But that’s only half the story.

Like any business relationship, vendor management is a two-way street. Vendors also expect fair treatment, timely payments, and good communication from their customers. That’s why businesses often rely on vendor management systems and digital tools to streamline the process and keep both sides satisfied and profitable.

In this guide, you’ll learn the basics of vendor management, why it’s important, and the obstacles you can expect. Plus, you’ll discover the best processes and tools to maximize vendor management.

No matter what size your business is, this guide will help you understand

  • What vendor management is and what it means for your business
  • The challenges business owners face when managing vendors
  • How to create vendor management goals and KPIs
  • How to manage vendor relationships
  • How to get the most from your vendors, including higher quality and lower costs
  • How to research and screen potential vendors
  • How to evaluate vendors and how automated forms can help
  • How to negotiate and close with vendors
  • How to create effective vendor contracts
  • The why and how of tracking vendor activity and performance
  • How to use online forms to track vendor invoices and payments

Let’s dive into the world of vendor management.

Vendor management: The basics

As a business owner, you rely on vendors every minute of every day.

Whenever you switch on the lights, you depend on the electric company to power them. Want to grab a danish from the kitchen? You won’t be able to if there isn’t a bakery to bake them. Need to stack the store shelf with a new product? You need a wholesaler to supply it.

The electric company, the baker, and the wholesaler are all vendors. All the suppliers to your company are vendors, and you need to manage them effectively.

What is vendor management?

Vendor management is the sum of the processes put in place to manage activities and relationships with vendors. In some cases, vendor management is extremely complex.

Believe it or not, 18 percent of enterprises surveyed said they work with 1,000 third-party suppliers, and 16 percent said they worked with over 10,000. It’s no wonder large businesses devote entire departments and teams to managing vendors. But vendor management isn’t just for big companies. Even one-person businesses can have a dozen or more suppliers.

Vendor management covers the entire life cycle of your vendor relationships. It starts with researching potential vendors and choosing the ones you want to work with, followed by assessing risks, negotiating contracts, tracking vendor performance, communicating with vendors, and paying vendor invoices.

Vendor management also includes tricky situations, such as replacing those that quit, go out of business, or are no longer a good fit.

How vendor management can help (or harm) a business

Vendor management may sound like a fancy term for a daily task. But it’s much more than that. The way you manage your vendors could directly impact your business’s ability to operate and your financial bottom line.

Let’s take a look at how and why vendor management is important.

Provides a one-stop vendor information repository

A big part of vendor management is researching and evaluating the different suppliers you may want to work with. Of course, you’ll eventually narrow it down and choose one, but the research process will give you a better understanding of vendors and what they offer, including pricing.

Make vendor lists, both current and potential, accessible to all relevant employees so it’s easier for the entire team to stay on the same page.

Creates better vendor relationships

Good vendor management encourages positive relationships with vendors. How?

  • It helps you choose the best vendor for your needs from the start.
  • It assesses the risks of using a specific vendor up front, which helps you avoid potential issues before they arise.
  • It tracks a vendor’s performance to ensure expectations and contract terms are fulfilled.

These factors contribute to smoother operations and increase the vendor’s loyalty to the company.

Helps you reach your business goals

Effective vendor management helps companies produce the products and services they need to achieve their business goals.

For example, say a company employs several salespeople who are constantly on the road in remote regions. They all need high-quality smartphones with robust, reliable data coverage.

By using vendor management processes, you can select the mobile provider that offers the best coverage and the best price. This reduces the risk that the salespeople will be out of contact and miss their quotas, while still prioritizing the company’s budget concerns.

Saves costs in the long term

The vendor evaluation process enables companies to gauge market pricing, compare quotes from several vendors, and negotiate the best price from a position of strength. But vendor evaluation doesn’t stop once the contract is signed.

Continually monitor market prices and evaluate vendor performance to ensure your business always gets the best deal. At the end of the day, good vendor management will reduce costs, prevent overpaying, and help businesses save money.

The challenges of vendor management

Missing vendor information, difficulty getting signatures from vendors, a lack of bidders driving up costs — there are endless challenges in vendor management, and not just for large enterprises. Let’s take a look at some of the typical obstacles for small to medium-sized businesses.

Negotiating contracts

One of the toughest parts of vendor management is agreeing on pricing and terms that are cost-effective for both parties. The business and the vendor are both out to maximize their profits, and finding the middle ground can be difficult.

In a competitive market, businesses must do thorough vendor research and consolidate their findings to ultimately negotiate the best possible deal. It’s not just about the cost — it’s also about getting the best in terms of performance, loyalty, reliability, and ability to meet deadlines.

Keeping track of documentation

Vendor management involves mountains of paperwork. Vendor information, such as contact details, delivery schedules, and payment information, must be accessible to relevant employees at all times.

Tracking vendor performance and KPIs is an ongoing job that requires the input of several people. Vendor evaluations, contracts, logbooks, and invoices create massive amounts of documentation you must constantly track, organize, and manage.

Maintaining relationships

A study of automakers estimated that four leading companies, including Ford and General Motors, would have gained an extra $2 billion in profits by improving their supplier relationships.

Relationships with vendors can be delicate. Dealing with deadlines, performance issues, quality complaints, price negotiations, and disagreements are part of managing suppliers. If not done properly, vendor relations suffer — and so does your business.

Automating processes

Vendor management software is too cumbersome and costly for most small companies. However, relying on haphazard or manual solutions, such as Excel spreadsheets and emails, is less than ideal.

Companies can use several digital tools to automate and streamline vendor management at little to no cost. Examples include automated invoicing software, digital logbooks, and online vendor application forms. Automated digital solutions can reduce or even eliminate many of the challenges of vendor management.

How to establish vendor management KPIs

Measure, track, and measure some more — this is the key to effective and efficient business management. The same applies to vendor management.

To track the performance of your vendors, you must set key performance indicators (KPIs), or goals. Knowing what you need and expect from vendors up front will help keep costs down and efficiency high.

Make sure you’re getting what you pay for

Vendors must deliver according to the quality and timelines agreed upon in advance. By measuring KPIs, business owners can track whether vendors are living up to their end of the contract. Poor KPI performance is a strong indication that the vendor relationship isn’t working and needs to be fixed, either by adjusting certain conditions or switching to a new vendor.

Identify any problematic patterns

When you work with a vendor on an ongoing basis, measuring KPIs can help identify systemic problems and poor performance. For example, if a vendor is regularly late with deliveries, tracking can help you find out just how deep the problem runs.

Late delivery can easily disrupt your workday and make your business less efficient. By tracking KPIs, you don’t need to rely on memory. You’ll know for sure when and how a vendor problem is impacting your business.

See how the vendor fits in with the bigger picture of your business goals

When vendor KPIs are aligned with your end goals, you can steer your vendor activities toward meeting them.

In product manufacturing, for instance, it’s important to measure the KPIs of the suppliers that contribute parts. If a specific component doesn’t meet the quality KPI, you must take action with the vendor. Otherwise, this could affect the entire production process.

Similarly, if vendor costs rise incrementally, you can soon find yourself overpaying or exceeding your budget. Ensuring you engage with the right vendors is a crucial part of ensuring business success.

Vendors in focus: Key KPIs in vendor management

What are the main KPIs in vendor management? Some are quantitative and relatively simple to measure. For example, keeping track of vendor pricing is a numbers game.

However, other metrics are qualitative in nature and, therefore, much harder to define. How exactly can you “measure” a vendor relationship? It’s not just about deadlines and quick response times. It also involves the chemistry between a business and vendor — whether their values align and if they solve problems well together.

With that in mind, let’s take a look at some of the most important metrics in vendor performance, including “hard” and “soft” KPIs.

Relationship management

You can measure vendor relationships by assessing the vendor’s commitment, flexibility, and innovation. This is reflected in many ways, such as their ability to meet deadlines, the consistency of their service quality, how they respond to complaints, and their capacity to deliver creative solutions that meet your business needs.

Set several metrics to assess the relationship. How long does it take the vendor to respond to your calls and emails? Are they able to adapt and update their product or service when required? Do they communicate clearly, or do interactions leave you feeling confused?

Create a questionnaire — for yourself or any employees who deal with the vendor — asking to rate the relationship across various parameters. This is a great way to quantify aspects that aren’t easy to measure, providing you with a baseline to understand if and how well the relationship is working.

Cost management

Cost KPIs depend on a host of issues, including market prices, budget, and the ability to negotiate better pricing with potential vendors.

There are several ways to measure costs and improve KPIs. For example, when buying in bulk, you can negotiate discounted pricing for a longer contract. This is a great approach when you’ve established a solid vendor relationship and know you can rely on each other.

Also, conduct extensive market research and find out the current price range. You can use this data to compare what you’re currently paying and negotiate a lower price with a vendor or seek out a cheaper vendor. Either way, you’ll improve cost KPIs.

Quality

Quality is all about meeting requirements that were agreed upon in advance. You can measure these KPIs in several ways.

Is the quality of the service or product provided by the vendor reliable? Does it deliver results? Does it bring good ROI?

Also, take into account order accuracy. Incorrect orders must be returned and replaced, which creates a drag on your resources and schedules.

A quality KPI can be as simple as tracking how many incorrect or low-quality orders occurred in the past three months. This is very important to ensure you maintain a smooth workflow and meet deadlines.

Delivery

You can measure delivery using a range of KPIs. The most basic is on-time delivery. Compare actual delivery times to scheduled times to determine how close the vendor is to meeting their commitments.

Another critical aspect to measure is how the vendor responds to emergencies. For example, if a vendor uses a third-party courier to deliver a time-sensitive order, what happens when the order doesn’t arrive? How quickly can the vendor rectify it? Or if a delivery arrives broken or spoiled, can the vendor replace the order immediately?

Numerous issues can cause problems with orders, so you may need to track them on an individual basis. It can be as simple as creating a spreadsheet to monitor any order issues or emergencies and examining it every quarter to ensure they fall within expected KPIs — number of issues, time to respond, and time to rectify.

Want to dive deeper into vendor tracking? Check out Chapter 7 of this guide.

Collecting vendor information the smart way

There’s a whole lot more to vendor information than contact details. Vendor information includes things like product specs, quotes, geographic areas where the vendor operates, contracts, NDAs, payment terms, and invoicing details.

All this information must be centralized and accessible to various employees and stakeholders who refer to it for business planning and operations. At the same time, some vendor information, such as legal documentation or pricing, may be confidential and should only be accessible to certain staff members.

The process of collecting, storing, and sharing vendor information can be tricky — not just current vendors, but also vendor applications and information about potential contacts that may be useful sometime in the future.

Digital tools and processes can make a huge difference in managing vendor information.

Collecting current vendor information

It’s important to make sure that vendor information is up to date at all times. Do this every quarter to keep vendor records clean, correct, and relevant.

Digital vendor information forms are an efficient way to collect and organize vendor details online. Use Jotform’s Form Builder to customize a simple vendor contact form or a more complex vendor information sheet that includes all the data necessary for your records.

Digitizing the collection process makes it fast and easy for both parties: The vendor completes and submits the form online, while the business owner receives the vendor information, consolidated online in one centralized place. This allows you to export or share information with all relevant internal parties.

Screening potential vendors

To search for and screen potential vendors, you need certain documentation, such as vendor application forms, vendor questionnaires, and registration forms. Creating vendor screening forms is quick and easy with digital templates. You can send these forms to applicants via a link or embed the forms on your website. As soon as an applicant submits their data, it will be  organized and stored in one place that’s accessible to relevant employees.

If you already have vendor screening forms in PDF format, you can convert them to online forms using Jotform Smart PDF Forms with just a few clicks. This enables you to continue using your current forms with all the advantages of digital backend management.

Onboarding new vendors

When you decide to work with a new vendor, you must onboard them into your system.

In straightforward cases, this requires recording the vendor’s contact information and payment details. In more complex instances, you may need to instruct the vendor about company operations or processes, or set them up physically in the office or virtually on your systems.

A digital vendor onboarding form is an effective solution, because you can customize it to include relevant details, such as the vendor’s technical needs, preferred payment method, and other special requirements.

For example, a company that runs trade exhibitions will work with dozens of vendors that need to set up booths and stands at different shows. A digital vendor setup form is a great way to centralize and automate the process of vendor setup, ensuring vendors provide and receive all the necessary information for a smooth experience.

Collecting vendor information hinges upon communication and organization. Streamlining both of these processes with the help of online vendor information sheets and vendor setup forms is a smart way to go.

Evaluating vendors

Before signing on the dotted line, every business owner must evaluate the vendor.

Vendor evaluation is the due diligence you perform to ensure you select the best vendor given your circumstances. Often, several vendors might be a good fit. Once you narrow down the initial vendor list to the few that show true potential, you can create a vendor evaluation process.

What to consider when comparing vendors

There are many types of vendors, so every vendor evaluation process is different. Evaluating an internet provider isn’t the same as evaluating a cleaning service. However, several key parameters apply to any kind of vendor evaluation, and they should all be given significant weight. Let’s take a look at some of the most important ones.

Cost

The price of the product or service is a primary consideration and will depend on several factors, including your budget and the vendor’s willingness to negotiate on pricing.

Quality

Vendor evaluations help get the best quality at the best price. There may be instances where lower quality can be a trade-off for lower costs.

For example, a company can choose a supplier of budget-priced generic cleaning products, rather than the more expensive branded products. However, when choosing a vendor to manufacture a critical component in a specific product, you should prioritize quality, potentially resulting in a higher cost.

Delivery capabilities

When evaluating a vendor, their ability to deliver orders correctly and according to schedule is crucial. Late, broken, or incorrect deliveries can seriously impact a business’s ability to function. It also affects the workflow of employees responsible for receiving and processing vendor deliveries and payments. Plus, if a vendor is unreliable with their deliveries, this can be a red flag for other issues.

Service level

Vendor relationships go far beyond delivery and payment. What customer support does the vendor have in place? How do they handle problems or last-minute requests? Do they offer flexibility in their products or services? Can you adjust orders easily online, or do you need to chase after a service rep?

All these aspects are part of a vendor’s service level, and if you’re entering into a long-term agreement, you want to be sure the vendor will provide superior service.

Communication

The last thing any business owner wants is to employ a vendor that’s difficult to work with, hard to get in touch with, or unclear in their communication.

As with all types of relationships, chemistry can be important with vendor relations. It’s much easier and more pleasant to work with a vendor that shares your values, communication style, and frequency of communication. That “click” isn’t essential — but it’s a bonus.

There are quite a few characteristics to consider when evaluating vendors. Plus, vendors often work with multiple employees in your company, so collecting feedback and internal reviews from different departments will help you make a decision that works best for everyone involved.

Whether prospective vendors or current vendors, conduct their performance evaluations using online evaluation forms. It’s easy to distribute these forms to relevant employees, requesting their feedback and opinions about vendors. Just send an email with a link or assign the forms directly to employees.

Responses will go directly to your Jotform account, making it easy to consolidate vendor data for key decision-makers. This is just one way you can streamline vendor evaluation — a somewhat complex and messy process — and make it more efficient.

Vendor risk: There’s no escaping it

Like all business activities, working with vendors isn’t without risk. Budget, deadlines, workflow, security — they’re all exposed to risk from the different vendors you use. Minimizing these risks should be your top priority.

A vendor risk assessment identifies the risks at play and rates the risk factors for each prospective vendor. Let’s take a quick look at what a vendor risk assessment covers.

Financial risk

You always have to pay vendors. Sometimes they are directly involved in profit-making processes. That’s why vendors have such a big impact on financial performance. For example, a vendor that produces a critical component for a company’s flagship product must present a low risk and be able to deliver a stable supply.

Operational risk

Similarly, many businesses rely on vendors for their daily operations. A high-risk vendor can place the company’s entire operations in jeopardy. For instance, a software vendor that supports critical 24-7 operations poses a high risk if their software is buggy or demands constant troubleshooting.

Compliance risk

There are many laws and regulations businesses must comply with. In some industries, these laws are complicated and come with heavy penalties.

For example, healthcare providers must comply with HIPAA privacy regulations. Food service and cosmetics companies face dozens of health and safety regulations.

Using third-party vendors increases the risk of noncompliance as it puts various business activities in someone else’s control.

Data security risk

Vendors sometimes need access to a business’s systems and data to do their job. This is particularly true for software vendors or third-party contractors that have a user ID to access the business’s networks. As the threat of data breaches grows every day, assessing a vendor’s data security risk is essential.

You can customize online risk assessment forms to take into account the relevant risk parameters for different vendors. For example, a vendor with no access to a business’s computer network, such as a vendor that supplies fresh produce, doesn’t need to be assessed for data security risk, but they do need to be assessed for health compliance.

It’s important to devise and conduct the vendor risk assessment before entering into a contract. There’s no way to eliminate vendor risks entirely. But a timely risk assessment process can prevent foreseeable risks from becoming significant problems down the road.

Finalizing vendor contracts

Congratulations! You’ve chosen a vendor, worked out the fine print, and you’re ready to sign the contract!

The what?

A vendor contract is a legal agreement between a business and vendor that outlines the service or product the vendor will provide and the cost and payment terms the business will follow to compensate the vendor.

Like any legal contract, vendor contracts should be foolproof. That’s why businesses typically rely on the input of a lawyer or legal consultant for vendor contract management.

What does a vendor contract include?

Vendor contracts can range from fairly simple — when working with an independent freelancer on a small project — or highly complex and full of confusing legalese, like when a contract covers a long-term agreement with many parts.

Vendor contracts include the following information:

  • The names of both parties. This includes the business and the vendor.
  • Definitions of the terms used. For example, what exactly is covered in the vendor’s service?
  • A statement of work. This is a description of what the vendor will provide to the business. It should be as detailed as possible and be in the form of a bulleted list to ensure all aspects of the work are covered.
  • Deliverables. In cases where the vendor must produce deliverables, such as a product, the specifics are included here.
  • Responsibilities. In this section, the responsibilities of each party are described in detail. This is particularly relevant for a service contract, where both parties will need to operate in tandem to get the job done.
  • Timelines. Vendor contracts should include the expected timelines and deadlines agreed upon by both parties.
  • Payments. Outline, in detail, the amounts, due dates, and methods of payment to the vendor.
  • Performance issues. A solid vendor contract will cover the processes agreed upon to handle issues of quality and performance. For example, what’s the penalty for late delivery? What steps are taken if a product is delivered damaged?
  • Legal clauses. Vendor contracts include clauses to cover issues such as privacy, copyright, force majeure, etc. A competent attorney should handle this portion of the contract to ensure all the bases are covered.
  • Signatures. Both parties must sign and date the contract to validate it.

Types of vendor contracts

Just as there are many different types of vendors and vendor agreements, there are several vendor contracts for every situation. Here are the main ones you should know about.

Fixed price

This is a fairly straightforward vendor contract that defines a lump sum payment for a one-off product or service.

Time/materials based

This type of vendor contract covers services provided and paid for according to time and materials used. For example, if you’re using vendor services at an hourly rate, this is the kind of contract you’ll need.

Cash reimbursable

In some cases, vendors are paid for completed work plus a portion of the profits that resulted from their work. This type of contract is suitable for agreements that involve a higher risk or where the joint operation’s success isn’t clear at the outset. The reimbursable part of the payment can even be tied to certain milestones on the vendor’s part, such as on-time delivery.

Indefinite delivery

This type of contract is for projects that aren’t well defined at the outset and don’t have a preset schedule or output. Usually, a minimum and maximum quantity is spelled out, which serves as a broader framework to keep matters in check.

The moment of truth: Getting vendor contracts signed

Once agreements are set and contracts drawn up, the next step is getting the vendor to sign. And not just the contracts, but also other legal documents that may be required, such as NDAs.

Using digital vendor contracts and NDA forms is a very efficient way to collect signatures online. With a customized template, it’s easy to adjust the contract for specific vendors and doesn’t require you to create a new form from scratch every time.

Smart PDF Forms are also a great choice for collecting vendor contract signatures. You can easily turn your PDF contract into a dynamic digital form that the vendor can sign and send back to you completely online.

This is a great option if you already have standard contracts and forms set up in PDF format. All you need to do is convert them into online forms with a few clicks, and the information submitted through the form will automatically populate the original PDF contract.

Tips for successful vendor negotiation

Negotiating vendor contracts can be intimidating. There are many details to consider and a lot at stake for your business. Make sure you’re getting the best possible deal, but don’t miss out on a great vendor just because of a slip-up during the negotiation stage.

Here are a few tips to keep in mind when approaching vendor negotiations for the first time.

Check out several vendors and bring pricing to the table

The best thing you can do to succeed at the negotiating table is to prepare beforehand. Research other vendors and get a feel for the current market price. If possible, get in touch with previous customers to find out about their experiences with the vendor. The more information you have, the better positioned you’ll be to negotiate a deal that’s fair and appropriate.

Keep it amiable

Both the business owner and vendor are looking to get the best deal while also cultivating a positive atmosphere. Remember, you’re trying to reach a mutually beneficial agreement, so try to see it from their side. The vendor should be interested in your perspective, too — if they aren’t, simply move on to a vendor that is.

Stick to your guns

You can be considerate of a vendor’s needs, but at the same time, don’t be swayed from your principles. Decide on a list of “musts” that are nonnegotiable, and don’t let yourself be convinced otherwise. There are plenty more vendors out there — if this one isn’t right for you, continue the search until you find the one that is.

Use your head — and listen to your gut

Negotiations aren’t simply a numbers game. A strong vendor evaluation process provides you with data so you can determine the best price, an optimal delivery schedule, and other data-driven parameters.

But at the end of the day, there are less tangible qualities to vendor negotiations too. Don’t ignore your gut instincts. Even when the deal sounds right, if something feels off, take the time to dig deeper. Your gut can tell you things you might overlook on paper.

Vendor tracking

Keeping up with the day-to-day of your business is a full-time job. Add to that the multiple vendors you work with — each with their own KPIs, issues, and invoices — and suddenly the job becomes even more intense.

It’s easy for business owners to lose sight of individual vendors in the clutter of a busy workday, and that’s when mistakes happen. Poor vendor communication, missed invoices, late payment fees, and lack of vendor accountability all lead to reduced efficiency and increased costs.

The way to avoid this is by establishing clear vendor tracking methods. With the help of logbooks and scorecards, business owners can shed light on vendor activity and performance, opening up a clear path to meeting KPIs and boosting profitability.

Let’s take a look at three simple ways you can incorporate vendor tracking into your vendor management strategy to make it even more powerful.

Keeping score: Using a vendor evaluation scorecard

A vendor evaluation scorecard is a tool for tracking and rating vendors so you can get a clear, actionable picture of vendor performance.

You can use vendor scorecards to monitor one-off projects, providing a benchmark if you decide to use the vendor again in the future. But the vendor scoreboard’s true value is in continual monitoring of long-term vendors.

Much like football scores over a season, the vendor scorecard tabulates the ratings of vendors during extended periods, giving you a wider perspective to help you make smarter decisions.

There are a few steps to developing an effective vendor scorecard:

  1. Define the KPIs. As discussed in Chapter 3, establishing vendor KPIs provides you with a quantifiable benchmark to measure vendor performance.
  2. Create metrics. Using your KPIs, define the specific data points you’ll track. For example, track the vendor’s delivery times, quality level, or any other relevant metric.
  3. Assign a weight to each metric. Some metrics are more important than others in the bigger picture of vendor performance. Give appropriate weights to the metrics according to their impact on the vendor score.
  4. Start scoring. Fill in the scores regularly or as needed, and then decide on a suitable time frame for an overall analysis.

The vendor evaluation scorecard results equip business owners with the data they need to adjust their vendor activities and strategies to ensure vendors meet KPIs and the business achieves the best results possible.

You don’t need expensive software to create a vendor scorecard. A basic spreadsheet in Excel or Google Sheets is more than enough.

Log in to success: Keeping a vendor logbook

When a vendor supplies a product, keeping track of product received and payment owed comes down to good inventory management. But what if a vendor provides a service? What’s the best way to keep track of work performed or hours worked?

Sometimes, the vendor is located onsite at your company. In other instances, the vendor works at another venue or even in a different state or country. Either way, businesses must provide vendors with a way to log their activity so they can track and properly bill for it. Cue the vendor logbook.

A vendor logbook is a record of services provided by the vendor, whether it be time-based (i.e., hours or days worked) or task-based (i.e., jobs performed).

An online logbook is the most efficient way to tackle this aspect of vendor tracking. Vendors can fill in and monitor the logbook in real time. In addition, they can access digital logbooks from any computer or via their mobile phones if they are offsite.

You can customize a digital vendor logbook form to meet your business’s look and feel and adapt it to the format a specific vendor requires.

At the end of the month, or whatever billing period you use, download the online log for performance tracking and invoicing.

Payday? Tracking vendor invoices

There’s another area of vendor management that can be a real headache for business owners: tracking vendor invoices and payments. Lost or forgotten invoices lead to late payments and penalty fees, and disorganized vendor invoicing makes it impossible to keep the company books in order.

Digital form templates can assist with several invoicing activities, helping businesses keep track of vendor invoices and payments in a centralized and streamlined way. Vendor invoice submission forms, for example, enable vendors to submit several invoices at one time, minimizing the hassle of processing multiple invoices from a single vendor.

Vendor invoice forms make ordering from vendors much easier too. Rather than sending orders in a plain email message or as an attachment, businesses can create, customize, and send professional-looking digital invoice forms with just a few clicks. You can adapt the invoice form to include relevant fields, information, disclaimers, and more based on the business relationship and your agreement with the vendor.

Vendor management starts with choosing a vendor and bringing them on as part of your supply team. But it never ends there. Tracking vendor activity and performance is the only way to know exactly what you’re getting from vendors. That knowledge will make the difference between a mediocre vendor relationship and a very successful one.

Conclusion

No business is an island. Every company, big and small, uses vendors.

Two vendors are fairly manageable, but how about 10, 50, 100, or more? Handling vendors, day in and day out, is complicated and stressful. What’s more, many vendors are essential to the running of your business — from electricity to internet providers, marketing to manufacturing, coffee pods to consultants. That’s why vendor management should be a top priority for every business owner.

Vendor management covers the entire vendor life cycle: researching and evaluating prospective vendors, negotiating the best price and terms, managing vendor relationships, and tracking vendor performance. There’s no room for skimping — all of these processes are critical for an effective vendor management strategy that improves efficiency, ensures quality, and reduces costs.

Managing vendors is about thinking ahead, but no fortune-telling is required. Rather, establish solid processes with the help of digital tools that customize, streamline, and centralize your vendor activities. For example, using online vendor forms, logbooks, and invoices is a simple, low-investment tactic that can save a lot of hassles in the future.

Don’t wait till it’s too late: Start creating good vendor management practices today, and watch your vendor relationships grow and flourish.

This article is originally published on Feb 24, 2021, and updated on Mar 07, 2022.

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