6 best practices to power your vendor management process

Between managing your team and managing your business finances, managing your IT vendors might be the last thing on your mind. If it is on your mind, it may be on the back-burner. “It’s not important right now,” you might even say.

The fact is that not managing your vendors—or not using a vendor management system (VMS)—could be costing you time and money and hurting your business.

So what is vendor management, and how can it help your business flourish?

What is vendor management?

Vendor management, or supplier management, is the process of overseeing your vendor relationships and their tools as you apply them to your business. Further, it’s having a vantage point and control over the entire vendor lifecycle, from procurement to implementation to renewal—or removal, depending on the outcome.

Effective vendor management processes include:

• Controlling costs
• Finding vendors
• Guaranteeing service delivery
• Contract negotiation
• Vendor risk mitigation

Why vendor management is important for your business

To select better vendors

Selecting vendors is one reason why having vendor management software (VMS) is vital because you want to choose vendors that will complement and streamline your business activities. In other words, its purpose is to help you achieve your business goals. Other benefits of choosing the right vendor, to name a few, are to:

• Boost profits
• Save time
• Improve customer satisfaction levels

To manage contracts

With using many vendors comes contract management. Accordingly, a VMS will help you store vendor contracts in a central location and give you oversight into all aspects of those contracts: start and end dates, limitations, costs, and more.

To manage vendor performance

Effective vendor management systems also prevent and reduce the risk of supply-chain or service disruption by tracking and observing metrics and key performance indicators (KPIs) to what’s working or failing. As a result of having access to this data, you can make proper choices to monitor and improve the quality of work.

Related: Vendor Management Workflow – Eight Benefits

To improve vendor relationships

An organized VMS also improves vendor onboarding processes, which builds stronger supplier relationships and leads to negotiable rates. In contrast, disorganization can lead to mistakes and errors, like late payments—a mistake that can hurt a vendor relationship if made repeatedly.

To achieve overall better value

Overall, a VMS will achieve maximum efficiency by streamlining processes and cutting costs. These productive actions can also result in accumulated cost savings and increased earnings over time.

How a vendor management system works, in 4 simple steps

If a vendor management system is worth its salt, then it will handle many processes for you. A VMS:

• Provides storage: It stores everything from contracts, documentation, and risk assessments.
• Maintains a renewal calendar: A VMS must track all renewal and opt-out dates to avoid missed deadlines.
• Automates finances: A VMS can detect invoices and identify duplicate spending, so no more missed invoices or late—or duplicate—payments.
• Keeps a system of record: The VMS should be the single source of truth for all documents and actions, a transparent record for anyone with access to see.

Vendor management vs. SaaS management: What’s the difference?

Although vendor management and SaaS management share similarities, they are two different management processes. For instance, vendor management oversees vendor relationships—from searching for a vendor to negotiating contracts to adding them to your solutions stack. In other words, it’s vendor relationship management.

On the other SaaS management manages the SaaS solutions in your software stack, how your team uses them, how they perform, and if they’re the right ones for your company.

Learn more: “How more SaaS solutions can cause more problems”

SaaS vendor management best practices to get the most out of your service and software

One of the critical duties of a VMS is managing the SaaS vendor lifecycle. The SaaS vendor lifecycle is the process of choosing, implementing, renewing, replacing or removing a vendor from your approved vendor list. This process takes place in these stages:

1. Define the need

In other words, before sending out RFPs, identify your company’s or team’s pain points and determine what features you need to avoid unnecessary spending. Note who will use the tool and what problems you’re trying to solve, too. And by the same token, if you keep a SaaS app inventory, see whether they have new functionality that might address your need to, again, prevent additional spending.

2. Evaluate options

If you’re sourcing a new SaaS app, identify competitors and survey the SaaS market. For example, one approach is to talk to your peers who use similar software. You can also look at the major review sites and forums. When you’ve researched your vendor selection, evaluate the list and check for:

• Capabilities
• Pricing
• Security
• Ease of set up
• Ease of use
• Customer support
• Trial or proof of concept

3. Approve the vendor

To streamline your vendor approval process and onboard the new SaaS tools faster, you’ll want to use a comprehensive vendor approval checklist. In this stage, you’ll:

• Review privacy policy terms and conditions.
• Negotiate pricing and terms.
• Establish an internal relationship owner.
• Conduct a security assessment.
• Approve the annual budget.
• Review compliance.
• Review and sign contract.

4. Roll out your new software tool

In partnership with IT, develop a list of current employees who will need to use the tool, training those who require it. This phase is also an excellent time to add the app to the SaaS onboarding process for relevant new employees. It’s a good time to ensure that secure authentication processes are in place, too.

5. Store and manage vendor details

Add the new product to your app inventory, and record essential metadata. Keep a record of:

• Renewal date
• Business owner
• IT administrator
• Contract
• Compliance and security documentation
• Key documents, like risk management assessments
• Any other important notes

Avoid a spreadsheet to track this information. Instead, use a vendor management system. A SaaS management platform like Vendr will help track crucial information for your organization’s many vendors while giving you automated vendor approval workflows.

And remember to set notifications to remind you when a renewal date is coming up because you might need a 30- or 60-day notice to cancel. We recommend setting up an automatic reminder two months out, but that timeframe depends on the tool.

6. Renew or remove apps

As mentioned earlier, many vendors require a 30- or 60-day notice to cancel or change your service, so having a heads-up is smart. Use a checklist for software vendor renewals. Following the list for your SaaS renewal process will ensure you get the most out of your SaaS toolset and help you optimize SaaS spending across your organization.

Vendr makes vendor management easy

Stay on top of your contracts, never miss a renewal, set up an approval process that works, and keep spending under control with Vendr's SaaS management solution.

• Automatically detect invoices sent to employees across the company to help identify duplicate spend and shadow IT.
• Upload and keep contracts and documents organized on one platform with key metadata for easy access.
• View vital information at a glance for thousands of tools, including their compliance status, contact information, and more, with a proprietary database of vendors and apps.
• Track all your opt-out and renewal dates in the Renewal Calendar.
• Benchmark your SaaS spend and app usage depending on your company stage with data from thousands of companies.
• Begin a vendor approval, renewal, or termination in seconds with vendor workflows and automation.

To see how Vendr can help with your vendor management strategy, request a demo today.

Read more: “5 Best Practices for Software Licenses Management.”