Large businesses in today’s market work with a wide range of vendors. In fact, most companies are more dependent on vendor relationships for the success of their business than ever before, whether it be for talent acquisition, procuring office supplies, service providers or accessing equipment manufacturers.
That’s because vendors have specific expertise in a particular area of your business, making them a far more effective and cost-efficient way of accessing specialized knowledge without having to pay for an expensive in-house team.
A survey from Tech Pro Research found that 88 per cent of respondents worked with at least one outside vendor, while 47 per cent said their companies are managing more than 10 vendor relationships.
The study also found that 57 per cent of respondents said their company’s IT department spends more time managing vendor relationships than it did two years ago.
It’s clear that an increasing number of companies are realizing just how important vendor relationships can be for the success of their business. Many organizations, however, are still failing to create an effective vendor compliance program.
What is vendor compliance?
Since companies are increasingly relying on tens, hundreds or even thousands of vendors to provide products and services to run their businesses, a vendor compliance policy is essential to ensure vendors are;
- compliant with your terms of agreement,
- compliant with industry standards,
- and meeting the expectations of your company.
Effectively drawing up a vendor compliance policy, that all vendors must sign before they begin working with your company will ensure that your company is getting exactly what it pays for.
It’s not enough to simply tell your vendor what your company expects from them. By spelling out all of your expectations in a legally-binding vendor compliance contract, you’ll ensure that your entire vendor process goes smoothly - but, if not, then your vendor will be legally liable for any issues that arise.
The creation of a well-defined compliance policy for each vendor relationship will ensure your company reduces wasted time, increases the efficiency of the vendor process, improves customer satisfaction, optimizes the opportunity for profits and many other benefits.
How to ensure vendor compliance
Building a successful vendor compliance policy doesn’t have to be difficult. By following a few key tips from HCMWorks, you can vastly improve vendor compliance management and boost your company’s bottom line:
1 - Build a company-wide strategy
Successful vendor management is all about creating a consistent approach that’s implemented across your entire organization. Whether your HR, procurement or executive team will be in charge of vendor relationships, ensure everyone involved has input into your vendor compliance policy.
Speak to those employees involved in the plan and find out the biggest challenges for vendor compliance, and then assign roles and responsibilities that ensure your company is able to develop a strategy that addresses those issues.
2 - Ensure your vendors understand their requirements
Creating an effective legally-binding vendor compliance contract isn’t just about ensuring your vendor is legally liable for mistakes, it’s about ensuring they properly understand their compliance requirements.
If your organization currently works with vendors which are making mistakes, your first step should be to sit down with that vendor and ensure they understand exactly what you expect from them. By understanding your exact requirements, they will be able to deliver more effective and compliant services to your company.
3 - Perform risk assessments
Vendor compliance is not just about looking at the direct interaction your company has with a vendor. It’s also about regularly analyzing how much risk the vendor has mitigated through its own internal efforts.
If your analysis finds that a particular vendor is a high risk of breaking its compliance with your company, then it’s a good idea to mitigate that risk by looking for a new vendor.
4 - Use a vendor management system
A vendor management system (VMS) is a web-based software that allows you to create a systematic approach towards vendors, storing every piece of vendor data in one easy-to-use solution.
Managing your vendor compliance through scattered documents, multiple teams and no unified approach can be confusing and complex. A VMS removes this confusion by allowing your company to collect, store, manage and analyse data in one easily accessible location - that’s unified across your entire organization.
This allows complete visibility into vendor compliance and performance, empowering you to generate insights that improve the profitability of your business.
Want to learn how HCMWorks can improve your company’s vendor compliance through its vendor and technology-neutral managed services provider (MSP) program? Contact our team of experts today to find out more.