Running your company in 2021 is likely different than you expected. Now, COVID-19 is entering its second year and it’s put capital efficiency top of the list. Teams have adjusted priorities to respond to the changing needs of the workforce and market while meeting new expectations for year-over-year growth.
More companies now rely on outside vendors to help adjust to pandemic conditions that forced them to rethink capital allocation. Because of accelerated digital transformation, vendor management is crucial in keeping your workforce efficient.
What is vendor management?
Vendor management is the process that a company uses to manage vendor and supplier relationships. Vendor management includes:
Selecting your vendors
This includes research, pricing, competitive research, and compliance investigation. Many companies also require requests-for-proposals (RFPs) or competitive quotes when selecting vendors.
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Once a vendor is selected, they work with the finance team. The goal is to agree on a price and scope of work. Vendor price negotiation can be a time-consuming part of the vendor management process as both parties have their own lists of must-haves that make reaching a mutually beneficial figure take longer.
Who handles making sure the supplier has all the information and items they need? It’s up to you and your stakeholders to bring vendors up to speed on your company processes, timelines, expectations, what you’re hoping to achieve, and more. Once you negotiate a price, the next step is to get up to speed with both the vendor process as well as your own. Getting this out of the way earlier saves headaches down the line when it’s time to start thinking about renewals.
Ongoing relationship management
The relationship with the vendor will vary from company to company and department to department. An IT vendor may work with your company’s CTO. But, they may never meet anyone else in the company until they need to get paid. Managing and formalizing tricky communication flows are key to a successful vendor relationship.
Invoicing and payments
Many vendors and suppliers work on industry-specific accounting schedules. It can be complex to manage the invoices, schedules, and processing of various vendors. A vendor management system organizes and ensures on-time payments for all outside services.
The evolution of vendor management
Traditionally, vendors are thought of as outside consultants. Perhaps you contracted a recruiting firm during a hiring spree. You may have hired an investment consultant during a fundraising round. You may also think of your vendors as suppliers, like the electric company keeping your lights on?
With the advancement of the digital workplace, reliance on vendors has only grown. Beside traditional suppliers, vendors are also now SaaS (software-as-a-service) providers. These SaaS companies are vendors that replace or improve business friction. SaaS vendor management follows the same flow as traditional vendor management: selection, price negotiation, ongoing management, and payment.
On average, an employee uses eight SaaS products every day. Companies with fewer than 50 employees have about 40 SaaS products in their stack. Those companies with more than 1,000 employees pay for over 200 SaaS vendors. All of that adds up to $343,000 per year on SaaS.
Because SaaS products vary in both specialty and price, your company may not have central SaaS vendor management. For example, a central finance office likely manages enterprise software, like Salesforce. Yet, an individual contributor manages spend on an $8/month Google Chrome extension.
Prioritizing vendor management in 2021
Reliance on vendors adjusted when all industries underwent shifts due to COVID-19. Front-line companies invested in health vendors, like hand sanitizer providers. Remote companies purchased collaboration software like Zoom and Slack. The landscape changed both for vendors and those who hire them.
Finance and procurement leaders have enough on their plate as is, from real estate costs to office inventory and beyond. Increased SaaS adoption creates a longer list of purchase and renewal negotiations and vendor relationships to manage on their own.
With a lot of teams balancing between working from home and from the office, the vendor management process went fully digital with no in-person element. Many finance teams did not have a consistent and compliant vendor management process or system beforehand, making it a struggle to select, negotiate with, manage and pay traditional and SaaS vendors.
Here’s how you can focus on vendor management in 2021 to improve the experience for everyone and save your team time:
Define your company’s buying process
The issue within a lot of organizations is that there’s no clear buying process teams are required to follow. With a wide variety of roles negotiating and acquiring new tools, specifically SaaS tools, it’s easy for important steps to fall through the cracks. A marketer handling software negotiation, for example, probably doesn’t have time to plan ahead and instead buys last minute.
A formal buying process that outlines how to request new software, who to work with and how early to get those people involved, necessary security and legal reviews, pricing negotiating practices and contract agreements, and more, will avoid last minute, intractable purchases at high price tags.
Set clear expectations with vendors
You don’t want to be left hanging by a vendor that’s skirting promises – and they don’t want to be left hanging by you. Vendors and suppliers should have clear expectations for their work and pay schedule. Your 2021 forecast may look different than you thought so if you need to make changes to your vendor expectations, make them clear and in writing.
Analyze the cost-benefit of your vendors
When you’re using dozens of SaaS and traditional vendors, you may forget to measure efficacy. Which vendors are doing work that’s still crucial in 2021? And, are there vendors that can do it at a better value? Work with your finance team to find ways to streamline your vendor relationships. This will result in saved costs and improved benefits.
Use a vendor management platform
Get the most value out of your vendors by using a comprehensive vendor management platform. Vendor management platforms streamline price negotiation, management, and invoicing processes. At Vendr, we use data from thousands of transactions every year, along with our expert buyers to guarantee cost and time savings.
Vendor management platforms relieve your team from handling the particulars of renewals and managing vendor relationships so everyone can reallocate their time to more important work.