Create Your Own Vendor Management Process in 5 Simple Steps
The accounts payable team doesn’t always get the full story. They are bombarded with calls of “Where’s my money?” from vendors, and have to handle the pressure of balancing the demands of cash flow and early payment discounts.
If that weren’t enough, they have to check back to ensure that the deliverables were received, that there weren’t any duplicate invoices, and that any special terms are honored.
Just one small mistake can create hours of headaches: invoice numbers, payment terms, and exceptions hidden in email chains.
The vendor management process is complex even in the smallest of companies. Most companies use sophisticated accounting software to handle their books, but the AP team is still dependent on email and phone calls to other departments to ensure that everything was handled correctly. Creating an effective automated vendor management process can be a challenge.
What is a Vendor Management Process?
A vendor management process deals with the external vendors and suppliers who provide goods to your organization. It starts with vendor registration, in which you onboard your vendors into the system and ends with the vendor payment workflow.
The process consists of a lot of review and approval steps like vendor contract approval, invoice approval and payment approval. Hence, dealing it manually will make it cumbersome and this is where automation comes into play.
Stages of a Vendor Management Process
Vendor management is made up of a lot of steps like vendor onboarding, screening, vendor selection, establishing a rapport with the vendors, contract development and negotiation, contract approval, invoice approval and vendor payment. However, the major steps in a vendor management process are as follows:
- Vendor Onboarding
- Vendor Selection
- Contract Development and Approval
- Invoice Approval
- Vendor Payment
1. Vendor Onboarding
The preliminary step in a vendor management process is to onboard all the vendors and suppliers in to your system by capturing their details like supplier’s name, point of contact, pay rate, discount (%) etc.
2. Vendor Selection
Once you onboard all your vendors, the next step is to select the right vendor depending on various attributes like contract terms, pay rate, discount (%), the quality of the supply and so on.
3. Contract Development and Approval
After selecting the right vendor, develop the contract with the legal terms and get it approved by the procurement head, before sending it to the vendor.
4. Invoice Approval
Once the contract is approved by both the parties, the supplies are shipped to the buyer, following which the vendor sends the invoice. The invoice is then forwarded to the finance team for approval. Most big organizations have a lot of people to approve the invoice and hence an invoice approval software can be used to simplify the approval process, while keeping track of the invoices.
5. Vendor Payment
Automate Your Vendor Management Process in Just 4 Steps
1. Install the Apps
Install the automated vendor management apps from the list of 48+ pre-built workflow apps.
2. Customize the Apps
Customize the process as per your organization’s needs with easy, drag-and-drop forms and advanced Kissflow features. Add formulas, conditions, exceptions, etc.
3. Implement the Vendor Management Process
After you are done with the above-mentioned steps, define the workflows, set permissions, make the apps live and eliminate the email-based or spreadsheet-based vendor management.
4. Track Progress
View the status of every contract and invoice, and quickly spot bottlenecks. Make real-time changes to create a seamless experience.
5. Improve the Process
Use analytics, reports, and metrics to find new ways to make your vendor management process, more accurate, and faster.
3 Factors that Influence a Successful Vendor Management Process
- Relationship with the Vendors
- Constant Vendor Assessment
- Accurate Information Sharing
Relationship with the Vendors
The primary factor that influences a successful vendor management process is the relationship you maintain with the vendors. A buyer-vendor relationship turns out to be effective, only if it is mutually beneficial.
Constant Vendor Assessment
To make your vendor management process work well consistently, ensure continuous scrutiny of the vendors, to determine the quality of their supplies.
Accurate Information Sharing
To exchange information between both the parties, establish a secure channel and make sure your contract includes the terms and conditions that clearly draw out the consequences of a confidentiality breach.
Maintaining an efficient vendor management process involves more than just your accounts payable team. They need to be brought into the story and have instant communication with the people who requested the items in the first place.
When creating your vendor management process, remember to create consistent datasets that you can refer and have a way to bring your whole team into the picture.
To make the process accurate and hassle-free, remember to automate the whole of vendor management process with Kissflow, the simplest workflow software trusted by 10,000+ companies for vendor management.