Businesses work with third-party vendors for many reasons. Whether they use contractors to supplement the workforce, expand capabilities, or better serve customers, vendors are an essential part of daily operations.
The best vendors do everything they can to keep their clients happy. Yet certain challenges exist within every vendor engagement, such as managing contracts, delivering on-time payments and overseeing the relationship. Many reach a bottleneck at the same point: approvals.
To prevent damaged relationships, lost time and wasted money, businesses must figure out how to streamline the approvals process, which is an essential control point for effective vendor management.
Enterprise-level businesses typically manage their operations through dozens of software-as-a-service (SaaS)-based and on-premise solutions. The average employee outside I.T. often never needs to use more than a small fraction of these platforms, and can quickly build proficiency in the few solutions that are actually relevant to their job.
However, managers and other business leaders need logins to access dozens of these platforms, so that they can manage approvals in each. Their day-to-day job doesn’t necessarily require platform expertise, so when it comes time to manage approvals, they either don’t know how to use the platform or they rely on a series of e-mail alerts to manage approvals. As a result, they often miss deadlines or let a few slip through the cracks. Without an approvals platform, projects and contracts can grind to a halt or fall apart entirely — all because an e-mail went to the wrong folder or inbox.
Complex or unclear review chains frequently cause delays in approvals, resulting in missed payment deadlines and late fees. With better processes and easy-to-understand approval systems, businesses can even get ahead of payments and receive a discount for paying early. By streamlining the review chain and putting better solutions in place for managers and other business leaders, businesses can stop losing money in the form of late fees and missed discount opportunities.
Missed approvals can undo weeks or even months of vetting and negotiating with contractors. When payments fall through, third-party vendors will terminate their contract with a business, and without a signed contract, a new vendor will move on and find another client to fill its capacity. In both cases, the department requiring the vendor is pushed back to square one, and might have to halt essential business operations while a new vendor is identified. The process will likely be made worse by the simple fact that the new contract has to go through the same approval process which caused the failure in the first place. While the new contractor or vendor is being identified and vetted, delays in operations result in lost revenue and increased organizational risk.
To avoid additional costs associated with slow or lost approvals, there are a few proactive steps that businesses can take to prevent contract termination. By clearly defining relationships with contractors and taking steps to improve internal processes, approvals can be accelerated to the point where approval-related revenue loss is no longer a concern.
Requests for proposal (RFPs) must be clear, articulating the company’s needs from the outset of the relationship. They should also outline expectations for the contractor, providing easily understandable definitions of what success will look like during the duration of the relationship. By establishing strong guidelines in the RFP before a contract is ever signed, a business equips itself to select a high-quality vendor whose capabilities and expectations will best align with the business.
Nothing during the initial phases of the vendor relationship is more important than the contract. The business must establish key milestones, including start and end dates; define operational and procedural requirements, and clearly outline work specifications. By reiterating expectations laid out in the RFP stage, the business can demonstrate consistency to the contractor, and continue to lay the groundwork for its own employees to manage the relationship efficiently.
A scope of work (SOW) is a critical supplement to the contract. Where a contract might not contain all specifics of a project or ongoing task, a SOW can create an open channel of communication between the business and its vendor, by establishing payment timetables and clearly defining the responsibilities of both parties. This can also be an opportunity to protect both by placing measurable limitations on liability.
Once a contract has been signed and work begun, the business must follow through on terms outlined in the RFP, contract and SOW. If done properly, the business will have considered how to implement tools and processes capable of facilitating an efficient approvals system, and can then position itself to execute on that plan. By keeping track of periodic payment deadlines, completed work and any unpredictable externalities that might have arisen during execution, all that’s left is to ensure that business leaders can easily access and sign off on all their necessary approvals, saving time and money and preserving fragile vendor relationships.
While vendor relationships can break down due to delayed or lost approvals, businesses can keep vendors happy and remove the stress of approvals with the right planning and processes in place. As a result, employees at all levels become free to focus on other tasks.
Approvals should be removed from e-mail and consolidated into an easy-to-understand enterprise approvals platform, so that managers and business leaders can quickly and efficiently make decisions, whether they prefer to manage approvals using their mobile device, desktop browser or even a collaboration tool such as Slack or Microsoft Teams. When approvals go smoothly, they will have a profound effect on ensuring that a business prevents potential losses and pitfalls in its third-party relationships.
Dave Charlesworth is vice president of sales at Capriza, an enterprise approvals platform.
Enjoy curated articles directly to your inbox.