Common vendor management challenges and solution

Managing vendors is not child’s play. Without developing prior standards of what you expect from them, it will be hard to measure vendor performance. 

Every vendor operates differently. It’s your duty to identify who aligns well with your company’s vendor management policy and stays compliant.

Compliance check doesn’t just include their work quality but the overall performance expectations.

You choose your vendors based on affordability, requirements, and other factors. But that doesn’t mean you can settle for less and accept substandard performance. 

By choosing the wrong vendor, you can easily land in trouble. So, vendor management requires you to perform background checks to analyze their history. 

By performing this, you get to know about your vendor beyond what they have told you about themselves.

As vendor management is a collaborative process, having a centralized application can get everyone their approved level of access to your vendor’s data.

Not having access to the vendor data can slow down the vendor management process and pile up payments and other essential tasks.

So, you have decided to bring in a vendor management system. The big question is where the data is going to be stored.

Anything related to your vendor is sensitive information that you have to handle with utmost care. So, you need a foolproof, safe and secure source to carry the vendor data for as long as you need.

Storage remains a challenge for small businesses, as cloud storage seems to be the only safest but expensive option.

Manually handling vendor functionalities turns your system prone to errors, inconsistent entries, and information loss.

The inefficiencies in manual tasks will prolong the time to correct the past mistakes and include current updates. Picture wasting your employees' time and resources on data that’s good for nothing. 

Payment issues and risks can peak at any time while managing vendors. Your goal is to send the right amount to the right vendor on time.

But depending on your vendor’s location and payment terms and methods, your goal can get affected too.

Late or wrong payments are a sign of unprofessional and sloppy vendor management. 

There cannot be anything more frustrating than receiving damaged goods from vendors.

What can bring in more stress is when your vendor fails to acknowledge the mess. Unless you have a robust vendor management policy, it can be impossible to convince the vendor. 

Both parties must understand that shipping accidents happen and should be willing to take necessary steps according to the return and acceptance policies of the vendor.

To cover the financial losses, it is advisable to go for liability insurance. Remember that happy returns don’t fetch merry experiences all the time.

Payment frauds and money theft are likely to happen when you make online transactions.

Since your vendor is at the receiving end and can see where the payment comes from, they can skillfully commit this crime.

 If you use your debit card or savings account, your account and whole funds are at stake as they get exposed.

When you pay with credit cards, you get more protection and keep your original account behind the dark screen.

If there is a data-stealing or safety compromise, you can contact the bank, cut off the card and not pay for the expenses made after that.

It’s sad that vendors still pull this game to get more money from you. They send you goods first and later send the invoice with an increased charge (which can be an unnoticed mistake too).

Always store the purchase order, which contains the list and quantity of the order. 

This way, you can match the invoice with the purchase order and validate if the quoted amount is correct.

To avoid sending the wrong amount, implement an automated vendor management system that fetches and sends payment directly to the supplier on time.

Manual checking and processing can make way for errors. Make automation your best friend to resolve this.

Managing vendors benefit both you and your vendor monetarily and in other terms. In such relationships, laying down the conditions and policies can save some explanations in the future.

Have a clear vendor management policy and educate your vendors about it.

Whether it is a payment process or accepted shipping mode, sit with them and explain.

In return, learn about their business methods, delivery process, and other policies to not get surprised later.

Make customized terms that both you and your vendor agree to and ensure strict adherence from both sides.

Put it in writing! No matter how big or small the deal is, write that down in a contract and legalize it.

If you plan to save time by avoiding this formality, you might lose a lot later. This is because you have no proof to back up what you and your vendor have agreed upon.

It is not necessary that a crisis might occur in the future. But this is a measure you need to pull off damage control.

A contract can carry the products or services your vendor sells to you, finally negotiated costs, quantity, duration, and other particulars. 

Related read - How to negotiate with vendors to optimize costs?