Improving the Vendor Approval Process for Success

When it comes to business, the saying “time is money” couldn’t be more accurate. That’s why it’s so important to have a smooth and efficient vendor approval process from start to finish. 

Most vendor approval processes are far from perfect, but there are ways to improve them. If you’re not sure where to start, don’t worry!

Here are some of the steps and considerations you need to take to improve your vendor approval process.

What Is a Vendor Approval Process?

An important part of vendor management, the vendor approval process is the method by which a business evaluates, assesses, and accepts a new vendor into a working relationship.

The approval process for new vendors can be summarized into a handful of key steps.

Vendor Approval Steps:

1. Assessing your need for suppliers 
2. Organizing suppliers
3. Communicating with employees for more supplier information
4. Evaluating any impacts on your team and personnel changes
5. Using software to create automated approval processes and improve your workflow

Each of these approval process steps is important, but there are ways to improve them and make them even more efficient. Let’s take a closer look at each one.

Assessing the Need for a Supplier 

The first step in designing custom approval processes, and the vendor approval process in general, is assessing need. This involves determining what products or services you will require from a potential vendor and whether or not they’re able to provide these products or services within the price range and time frame you need them in.

One of the best ways to begin a proper assessment and better manage approval processes, is to create a Request for Information (RFI). This document outlines your specific requirements and allows vendors to bid on their opportunity to provide those products or services.

RFIs can be sent out electronically or by mail, and they usually have a deadline for responses.

Organizing Vendors

After you’ve assessed your needs, it’s time to start organizing your potential vendors. In this step, you will be able to keep track of which vendors you’ve contacted and what their capabilities are.

One way to organize vendors is to create a vendor list. This list should include contact information for each vendor, as well as details about their products or services. You can also use this list to keep track of which vendors have been approved and which ones are still being considered. In growing companies who make frequent purchases, vendor information can be stored in a large electronic vendor database. 

Communicating with Employees

The next step in the vendor approval process is communicating with employees. This involves sending out a request for more information (RFI) to employees who may have worked with a certain vendor in the past, and may be able to provide additional insights about potential vendors. Be sure to include specific instructions about what type of information you’re looking for in the RFI or any approval requests.

Evaluating Impact

After you’ve gathered more information about potential vendors, it’s time to start evaluating any impact your team may incur by working with a specific vendor. This includes things like personnel changes, budget impacts, and any other potential disruptions.

One way to evaluate the impact of vendors or suppliers your company is already working with, is to create a vendor scorecard. This document allows you to compare different vendors side-by-side and make an informed decision about which ones are best for your company in the long term. Once you have approval status, you can begin the business process of moving away from approval systems and closer to a standard approval process.

Deploying Software

The final step in the vendor approval process is using software to rework your workflow. This step is important because it can help you streamline processes and make them more efficient.

Several software options are available, but you’ll need to select one that’s compatible with your existing systems. After choosing a platform and integrating it into your stack, you can begin setting up your new workflow.

How to Choose Vendor Approval Software 

When choosing vendor approval software for the vendor approval process, there are a few things you need to consider:

• Ease of use: The software should be easy to use and understand.
• Compatibility: The software should be compatible with your existing systems, as well as your organization’s internal processes.
• Price: The software should be affordable and offer a good value for the price.

Why Accountability and Visibility Are so Important to the Approval Process

Let’s say you and your team have followed all of the steps in the vendor approval process and selected a vendor. But then, things start to go wrong. The products or services they’re providing are subpar, their prices have increased, or they’re not delivering on their promises.

In these situations, it’s important to have a review process within your approval system that provides accountability and visibility within your organization. That way, you can identify the problem and take corrective action quickly.

How to Implement Accountability Throughout the Process

Everyone responsible for approving vendors should know that they are accountable for their part in it. This means that if something goes wrong with a vendor down the line, they will be in charge of tending to it.

There are a few ways to implement accountability:

• Use a system that tracks everything: This could be as simple as using a spreadsheet to track vendor information or using software that tracks every step in the process.
• Create a clear chain of command: Be sure that everyone knows who is responsible for each task. This will help ensure that things are being done in a timely manner and that there is always someone who can answer questions.
• Make sure everyone understands the consequences: If something goes wrong, there should be a protocol in place to fix any problems. Understanding how these potential problems can negatively affect the organization can motivate people to do their part correctly and avoid making mistakes.

Understand That Vendors Can be Approved by More Than One Person

If you establish vendors that multiple employees can approve invoices for, it can speed up your vendor approval process. This is especially helpful if you have many vendors or work with vendors who provide different types of products and services.

Approving invoices from multiple vendors can be done in a few different ways:

• Set up an invoice approval process for invoices from approved vendors to be automatically approved.
• Allow certain people to approve vendors and invoices.
• Set up a system where multiple people must approve invoices from each vendor (double accountability).

Common Vendor Management Problems

There are a few common problems that can occur during vendor management:

• Lack of communication: If there is a lack of communication between the vendor and the company, it can lead to problems with the delivery, pricing, and quality.
• Poorly defined roles and responsibilities: If roles and responsibilities are not well defined, it can lead to confusion and frustration on both sides.
• Lack of transparency: If there is a lack of transparency, it can be difficult to track progress and identify issues.
• Inefficiencies in the process: If the process is inefficient, it can lead to delays and errors.

How to Avoid These Problems

The best way to avoid these problems is to have a clear understanding of the vendor management process and communicate effectively with both the vendor and the company.

In addition, it is crucial to be transparent and efficient in the process. This will help to avoid delays and errors.

Invoice Approval Tips

There are a few things to keep in mind when approving invoices:

• Make sure all of the information is correct: This includes the vendor name, invoice number, date, and amount.
• Verify that the products or services were received: If you have not received the products or services, do not approve the invoice.
• Compare the invoiced amount to the contract: If the invoiced amount is different than what was agreed upon in the contract, do not approve the invoice.
• Check for any discrepancies: If there are any discrepancies on the invoice, do not approve it.

Want to really make sure that everything goes according to plan and nothing is missed? Use software to automate as much of the process as possible to avoid human errors that could cost your business.

It All Starts With Vendor Onboarding

Vendor onboarding is the process of bringing a new vendor into your company and involves collecting the data your company needs to approve the vendor as a supplier.

It starts with assessing the supplier’s needs and ends with integrating them into your company.

There are a few steps in between, but, to recap, these are the most important:

1. Organizing: This includes creating a list of vendors and setting up a system for tracking vendor information, ideally with software.
2. Communicating: This step involves communicating with employees to gather more information about the vendor.
3. Evaluating: Did your approval process work? Is everyone ready to work with the new vendor for approving invoices?
4. Onboarding: This final step is integrating the vendor into your company through a vendor and supplier onboarding process.
5. Verification: Make sure the vendor has the regulations and laws in place that match your company’s needs.

The Importance of a Clear Vendor Onboarding Process

A clear vendor onboarding process is important for a few reasons:

• It sets the tone for business relationships: A strong vendor and supplier onboarding process will set the right tone for the relationship between the vendor and the company.
• It establishes trust: A clear and separate onboarding process establishes trust between the vendor and the company and aligns goals with guidelines and laws.
• It helps to avoid problems later on: By having a clear understanding of expectations from the beginning, it helps to avoid problems later on in the relationship.

A Strong Vendor Onboarding Checklist

Having a checklist for vendor onboarding can create a uniform process that works every time and takes the guesswork out of who to work with. It should look something like this:

1. Risk Assessment: You should know what risks are associated with the vendor and the products or services they provide.
2. Vendor compliance: The vendor should have the regulations and laws that match your company’s needs.
3. Products and Services: You should know what products or services the vendor can provide and how they can benefit your company.
4. Gather Information: This includes registration and data collection about the vendor, their company, and their products or services.
5. Open Vendor Information Internally: Your accounts payable department, finance, purchasing, warehousing, supply chain, and other departments should have access to vendor information.
6. Create an Onboarding Timeline: This timeline should include when the vendor will be approved, when products or services will be received, and when payments will be made.
7. Onboard the Vendor: You now have gone through the final approval actions and can move forward after signing contracts with the agreed terms. During this period, invoicing details should be exchanged, training and orientation might be given, and contact details for everyone relevant to that vendor should be distributed.

The Evolving Vendor Approval Process 

Business is done differently now than it was even a few years ago. The way we communicate, the way we sell, and the way we buy have all changed. Because of this, the approval process has had to change as well.

In the past, the vendor approval process was much more manual. It relied on paper invoices, phone calls, and in-person meetings. Now, there are software programs that can automate basic tasks and much of the vendor approval process.

This includes everything from creating a list of approved vendors to tracking vendor information and onboarding new vendors.

Purchasing processes are important for every company, and with an airtight vendor approval process you can avoid vendor management headaches and start seeing the benefits of a well-oiled machine.