Effective vendor management is an often overlooked process. However, it is one of the most critical processes to ensure the smooth running of your business operations while planning for future growth. Building (and maintaining) strong vendor relationships results in:
• Better quality products – More often than not, improved product quality results in happier customers.
• Faster delivery – Having a reliable vendor helps to ensure that you can effectively meet customer demand. This also helps you to protect your company’s brand from being tarnished due to unprofessional or unethical suppliers.
• Competitive advantage – The ability to leverage your vendor’s expertise in a particular field can go a long way to boost your standing, especially if you operate in a competitive market. In addition, when you build a trusted relationship, vendors will often give you a heads up if they’re working on any process improvements or product updates that can lower your costs and boost your profit margins.
• Better financing terms – Maintaining a good working relationship with your vendors can be especially useful in the event of a cash flow crisis when you may need to request extended payment terms.
7 Vendor Management Tips for Small Businesses
Keep in mind that in order for your vendor relationships to be successful, the relationship must be mutually beneficial. Here are some best practices to improve your vendor relationships.
1. Choose your vendors wisely.
While it may be tempting to select vendors solely based on price, we recommend making your choice based on vendors who can provide the greatest value to your small business. There are a number of factors to consider including:
• Does the vendor have the ability to scale and grow alongside your business?
• What is their response time like?
• Are the terms of the contract reasonable?
2. Pay your bills on time.
Unless you run a cash-only business, then you know first hand the feeling of frustration when your customers pay late. Treat your vendors how you want your customers to treat you. Pay on time or communicate well in advance if you anticipate any issues so that alternative arrangements can be made.
There are a number of systems you can implement to ensure that you don’t fall into a trap of consistent late payments, which can not only tarnish your credit ratings but also your vendor relationships:
• It’s important to keep up-to-date records of each vendor and their related payment details, such as upcoming invoice due dates and payment addresses. One easy tip is to create calendar reminders so that you never miss a vendor payment. This can save on late fees and other penalties. It may also be beneficial to take advantage of early payment terms – provided that you don’t have any other upcoming obligations coming due, such as payroll.
• If you manage a large volume of bills and vendors, then you need to create an account payable platform to track your cash outflows. This is where virtual bookkeeping services come in handy to ensure your bills are paid on time while maintaining good vendor relationships.
For example, Remote Quality Bookkeeping can take control of this process for your small business by posting your bills to your accounting platform, such as QuickBooks. Thereafter, we will schedule a remote session with you to determine which bills you want to pay and when. Once you’ve approved the bills that need to be settled, we will pay them on your behalf. Alternatively, you can take advantage of our mobile solution to approve payments from a smartphone for an even more convenient experience.
• In addition to setting up bill pay in your accounting platform, you can also create recurring payments to vendors and suppliers. The best accounting systems will send you notifications when you make successful payments and automatically update your books thereafter.
3. Hire a vendor relationship manager.
This role will be the designated point of contact for your vendors, handling all communication (such as site visits or phone calls) with your company’s suppliers. He or she should also be tasked with coordinating the information flow between key internal stakeholders and vendors.
4. Share your vision.
Take the time to share your growth objectives and where appropriate, key data that drives your growth strategy. Quality vendors can provide guidance and feedback regarding your industry that you may not find elsewhere. By the same token, be sure to communicate new product launches in advance. By giving your vendor(s) a heads up when there are significant changes to the product line in your business, they can take the necessary steps to meet your needs.
5. Find out how your suppliers like to do business.
Taking the time to understand how a vendor runs its business will help you to optimize your entire process. This includes being aware of their time-frame for delivery, desired payment options, and other preferences. Asking questions of your suppliers is one way to learn more about their operations while building a healthy relationship.
6. Accept accountability.
The supplier isn’t the only one who’s responsible for ensuring a successful working relationship. Indeed, we recommend treating your vendor relationships as partnerships by accepting responsibility for any shortcomings on your end that may affect a supplier’s ability to deliver good or services on time.
7. Create a contingency plan.
Even the most trusted vendors can make mistakes. And, from time to time, other disruption may occur, such as natural disasters beyond their control. Therefore, it makes good business sense to have the information for a few vendor options on hand in the event of an emergency. However, when a vendor’s shipments start arriving late on a consistent basis, it’s time to re-evaluate your agreement.
Establishing healthy and long-lasting relationships with suppliers will go a long way in ensuring that you can deliver the best quality products to your customers while reducing costs and mitigating risk. Be sure to contact the team at Remote Quality Bookkeeping should you need further assistance with your vendor management needs!