Companies today are moving faster than ever to meet customer demand and maintain their competitive edge. As busy teams move faster to reach their objectives, they often turn to tools that can help them do their jobs faster, better, and more efficiently.
These new vendors can be great agents for success — with the right oversight. At small companies without robust IT or HR departments, a manager or team member may sign up for a demo or free version of software without giving much (if any) consideration to risk factors: Is the company reputable? How much of your company’s data will the tool have access to? Will it be handled safely? The answers affect not just your clients, but your employees, too.
When companies grow, it's important to develop a standardized onboarding process for service providers. This ensures that all vendors are vetted and evaluated for both business requirements and security considerations. Read on to learn how to build a successful vendor onboarding process that protects your organization, customers, and employees.
As your team or business grows and tries to accomplish larger objectives, you will onboard new vendors to help things move faster and more efficiently — and compensate for skills gaps. A vendor can be a tool, product, service, or consultant that helps your company get work done. So, vendor onboarding involves gathering all the information you need to qualify, approve, and contract with a new vendor.
We can’t overstate the importance of going through all the steps of supplier onboarding. It's one of the earliest stages of forming a new business relationship: If a vendor has had trouble in the past because of their product or service quality, it's better to find out the facts before aligning your brand name with theirs. No amount of money is worth the hit your reputation might take because you didn’t conduct a full risk assessment on a new supplier.
The length of time it takes to fully evaluate third-party risk a vendor brings can vary depending on several factors, including:
If you don’t have a robust framework to handle your due diligence and onboarding workflows, it will be much harder to get through the entire lifecycle efficiently. This is why many companies invest in vendor risk management software like HyperComply to streamline manual processes using automation and artificial intelligence, which can significantly shorten the process.
Vendor onboarding typically happens early in supplier relationships. Below are some triggering incidents that usually kick off the process. You should enact more vigorous vetting processes around suppliers critical to your organization’s success.
Your company is growing, which is great — but your old database is straining under the weight of the additional data. So, you decide it’s time to invest in new on-premises servers to handle the extra load, leading you to kick off a search for a prospective vendor who can install your new hardware.
The success of your business means you’re also ready to expand to a new store location. You will need equipment installed in the new office, furniture, and other assets. Not to mention, the vending machines aren’t going to fill themselves. Several of your old vendors are shutting down, so you must start a search for new service providers.
Many companies outsource certain business functions to an external vendor to save time and streamline their operations. Examples include hiring a company to handle your business’s customer service needs or for IT management.
The structure around your vendor onboarding processes makes tracking your third-party management process, collecting supplier information, and assessing vendor risk easier. If a vendor steps out of line regarding a contract, you have a consistent enforcement method to handle the issues.
Taking time to map out vendor onboarding accurately helps you catch red flags that signal future problems in the relationship. The more rigorously you vet suppliers at the beginning, the less likely it is that you'll have to deal with the fallout from your new business partnership later on.
Now that you understand better why assessing supplier risk is a must before you sign any contracts let’s go over the critical steps of vendor onboarding.
Vendor risk assessments are methods for reviewing the third-party risk associated with a new supplier. They help you determine which vendors provide the most value with minimal downside. You should conduct vendor risk assessments periodically to ensure vendors are not putting you at risk of violating industry or compliance standards.
Due diligence is an essential part of supplier management. Here, you gather critical supplier data around scoping the vendor. You should understand any legal and compliance issues affecting your business internally and globally. The process of conducting due diligence around new suppliers typically includes:
Companies typically have an easier time managing the complexities of due diligence by using vendor risk management software to map out onboarding workflows.
Once you’re done reviewing proposals from vendors and performing your initial research, the next phase involves direct engagement. Here, you meet with vendors virtually or in person and have them demonstrate the viability of their products or services. After that, you should engage with key stakeholders to whittle your vendor shortlist down further.
Think about who’s going to be impacted by your vendor choice. You want buy-in from higher-ups to have the organization’s full support. Because of that, your supplier list should consist only of highly vetted, quality candidates who can withstand further scrutiny without a problem.
From there, you need to consider how vendors align with your company in the following areas:
A vendor portal is an excellent way to connect with potential suppliers. They can quickly register their supplier information and fill out an application to work with your business. You should set up an easy-to-use form for receiving and saving contact information for providers. It’s easier to review the accuracy of data provided by vendors and streamline your information-gathering workflows.
Successful onboarding programs have an established channel for communication. Think about how different business areas like to access and share vendor data. The goal is to give all interested parties access to the same real-time information for decision-making. Communications, including notifications sent out at different stages of the vetting and approval process, help reduce delays while promoting positive supplier relationships.
Prepare a basic questionnaire template to assess vendor relationships. A vendor onboarding checklist keeps you from missing anything important and ensures you follow the process correctly.
Make sure the terms of your vendor contract are clear and understood by both parties. Avoid relying solely on boilerplate language because that can leave out many critical details. Take the time to review your business needs and those of the vendors, then make sure your contract reflects that wording. Keep the legalese to a minimum. Readability is always better than overly formal contracts that no one understands.
Conduct a security review that goes over what’s happening at essential connection points. For example, what happens if supply chain problems impact your supplier’s ability to meet your customer deliverables? Does the vendor have a data redundancy plan in case of a natural disaster?
Review the methods vendors use to grant access to sensitive data like protected health information (PHI) or personally identifiable information (PII). If a hacker gains the credentials of someone with access they shouldn’t have, it could lead to an entirely avoidable disaster. Nineteen percent of data breaches that occurred in 2021 happened because of stolen credentials.
Nothing lasts forever, especially the state of the business environment. Therefore, you need a change management strategy addressing how you and your vendor handle strategy shifts. Both parties should engage with each other to ensure there are no negative impacts because of a need to change how either conducts business. That way, you remain in alignment and remain functional.
Vendor risk management covers all the processes necessary for identifying and handling any risks associated with third-party providers. After locating vendors and selecting prospects, you need to develop risk assessment questionnaires and examine the validity of answers provided by service providers.
Intaking and onboarding new vendors require you to upload a lot of vendor data. You can work more efficiently by investing in quality vendor management software that lets you set up workflows to handle those manual tasks, sparing the hands of your data entry clerks.
From there, each vendor should receive an inherent risk score. Seventy-two percent of organizations rely on scoring during vendor evaluation. It provides a view of the vendor’s risk level before you account for the controls within your company.
Reviewing the inherent risk scores of new suppliers helps you decide what due diligence is necessary. Finally, you’ll need to look at the risk level of different vendors and how they impact your business.
You can’t move forward with onboarding without knowing what you expect from your vendor. Outlining your requirements and expectations beforehand helps you get through onboarding more quickly.
What business need will the vendor fulfill for your organization? How will you evaluate their performance? Think about using analytical tools, tracking campaigns if you’re hiring a marketing company, or executing physical labor.
Set expectations around how you expect the vendor to handle the security of information passed between the two organizations. For example, you should outline what level a vendor employee must have to view customer data. There should also be security protocols around handling information in databases so that you know the provider will store your company (and customer) data securely.
Discuss how various departments interacting with the vendor will pass on communications. You might want to set firm deadlines around when the third-party provider should offer a response to critical issues that are affecting your company.
Automation gets you through the vendor onboarding process faster by streamlining how you handle different functions. Cutting down on the time it takes to get through the reviews and approvals allows you to start working with your partner more quickly.
You can also automate monitoring service level performance from vendors to ensure they’re meeting the terms of contracts. A centralized view of vendor execution helps you catch minor issues before they balloon into more significant problems. For example, if you use automation to review invoices, it’s easier to catch fake ones from non-approved vendors before they get paid.
Below are some additional reasons to purchase software capable of automating vendor management workflows.
You can set up repeatable steps executed through automation to handle everyday tasks like registering new vendors. That makes things easier for your procurement department because they don’t constantly have to develop new processes.
You can reduce the amount of money paid for non-approved expenditures. It’s essential to control how money goes out as your company grows. You can also ensure that company purchases go through approved vendors who offer better rates and product guarantees.
Procurement companies need to establish relationships with vendors built on trust. Facilitating clear communication channels and responses to problems helps you resolve differences quickly and keep your business running smoothly.
Most issues that arise during onboarding happen because of not adhering to best practices. Here are some best practices to help you avoid common onboarding mistakes as you move through the vendor onboarding lifecycle:
You can’t leave your vendor management strategies to chance. HyperComply provides you with everything needed to automate your essential workflows and become a future-facing organization. Get started to learn more about the benefits of our platform.