vendor onboarding checklist Archives - DIRO Original Document Verification Technology

Vendor onboarding is a tricky yet extremely meticulous process. Supplier relationship management is a systematic process that allows businesses and organizations to collect documentation and data to qualify, approve, and contact vendors, purchase goods or services, and make timely payments to supply partners. Vendor onboarding compliance is tough as numerous steps are involved.

A vendor is an entity that sells any specific product or service to your business, either for your business to sell it or as part of an item that you resell. The vendor onboarding process for e-commerce or other businesses is pretty much similar to employee onboarding, in which new members of a business learn about a company’s practices, processes, compliance, expectations, etc. There’s a lot to understand about vendor onboarding, doing it wrong can open the business to countless frauds.

Vendor Onboarding Best Practices

A proper and flawless vendor onboarding checklist can help your business avoid hefty mistakes. An improper vendor onboarding process can lead your organization to legal and compliance risks. There are some best practices that you can follow to bypass the vendor onboarding challenges.

Know Your Rules

Before onboarding a vendor, your business should list and understand all the local, and global legal and compliance issues that apply to your industry and business. This assists in better vendor onboarding compliances.

Educate Yourself

Read and understand all the technical challenges of supplier onboarding related to your business type. Education can lead to a better understanding of how to secure your business against vendor fraud.

Prequalifying Is Important

Reduce your chances of risk and fraud by pre-qualifying vendors. Prepare a list of vendors based on their track record, willingness, and ability to meet up your organizational needs. This way you won’t be blindsided while onboarding a vendor. Verification can be done using vendor onboarding documents and ID verification solutions.

Build Thorough Contracts

Each vendor and supplier needs to have different types of contracts. To successfully onboard a vendor, you may want to build additional governance for strategically important suppliers. The best vendor onboarding solutions can help you verify your vendors and assist in building contracts.

Secure Information

It is always a good choice to secure your financial information from vendors, suppliers, and other third-party suppliers. You should use the latest technology and other solutions to verify if the vendors are legit and won’t cause any future problems.

Think Strategically

Design your vendor onboarding process with global compliance rules in mind and a proper idea of business that aligns with your business needs. Your strategies need to benefit your business and support your financial goals.

Track Data and Do Expense Analysis

Tracking data is always an important part of any onboarding process, be it employee onboarding or vendor onboarding. With constant data analysis, you can learn where to make improvements in your process.

Implement Internal Training

You need to make sure that every member of your team understands the steps of the onboarding process and the software that is used to verify vendor identities and documents.

Keep Team Members and Vendors Informed

Provide timelines and make sure your vendors follow through with them. Your team should be able to manage and deliver a plan. Your vendors should be aware of what you’re expecting of them, share this information with your vendors, and manage your expectations.

7 Mistakes to Avoid During Vendor Onboarding

Mistakes that are made during vendor onboarding are typically failures related to accountability, planning, compliance, and training. Now that you know what is vendor onboarding process is, the next step is to save organizations from risks. The best way to avoid mistakes is by following the best practices mentioned above and making sure to not make common mistakes. Avoiding vendor onboarding mistakes can offer great benefits to your company.

Here are all the mistakes you need to avoid during the Vendor onboarding process for e-commerce and other industries.

Unable to Get Buy-in from Top Management: Any business vendor relationship success depends on the top to lower-level management support throughout the organization. Without that, a business supplier relationship is bound to fail.
Failure to Choose Ideal Team Members: Accountability on your business’s end is the key to success. If your business is accountable for the work, the vendor partners will follow through.
Failure to Plan: A slow and tedious attitude will inevitably lead to performance issues between a business and vendors. You need to build your plans for the future for smooth operations.
Failure to Train: Without the right training and knowledge, your employees and vendors won’t be able to work ideally side by side together. Businesses need to provide proper training internally and externally.
Failure of Proper Compliance: Failure to find proper potential vendors and lack of proper following of compliance can lead to friction full business relationship.
Failure To Communicate: Improper communication is never a good thing in a business relationship. Keeping the vendors and everyone in your business in the loop is something businesses need to follow through.
Failure to Build Flexibility: A business should have the ability to go with the flow, continuous improvement requires a willingness to refine the business operations based on changing trends. To improve the vendor onboarding process, businesses need to be flexible.

Benefits of Proper Vendor Onboarding Compliance

Shifting your procurement and vendor relationships from old processes to a more strategic function offers benefits beyond competitiveness, it also helps improve efficiency, mitigating risks, better relationships, and a better brand reputation. Here are all the benefits that come along with a proper business onboarding process:

Greater Competitiveness: Most firms in manufacturing tend to spend more than 40% of their every dollar of sale on materials and goods. To achieve business goals, vendor management and close attention to buying performance can be critical factors in a firm’s competitiveness.
Improved Efficiency and Profitability: The right vendor can make or break your business. Whenever you streamline the current buying processes and make use of data collected by vendor performance. Right decisions can help you avoid income and productivity losses. A streamlined process leads to less waste, a higher productivity level, and reduced startup times.
Reduced Risk: Whenever you comply with industry and government regulations, you need to keep an eye out for your internal policies, verify your vendor’s AML policies and educate them on certain factors. You can even reduce the risks by employing strategic tools like the DIRO’s online document verification tool vendor and business verification.
Stronger Relationships: Vendor onboarding best practices lead to mutually beneficial partnerships which include training, proper flow of communication, and approval.
Boosts Brand Reputation: If your business has a poor-performing vendor relationship, it can impact your brand negatively and cause brand reputation damage. As a business, you need to take charge of your vendor’s performance to improve your reputation with the customers.

Automating the Vendor Onboarding Process for E-Commerce

Automation is always good, there are three main components that a business should consider for vendor onboarding:

Easy integration with internal platforms and systems already available
A self-service portal for vendors
Security to guard against cyber-attacks and prevent the business from financial fraud.

Your cost for vendor onboarding depends on the size of your business operation and the number of vendors you are currently working with. If you already have good working relations with a variety of vendors then you will need a system that can handle your growing needs.

How DIRO Can Mitigate Vendor Onboarding Fraud?

During the pandemic, the number of onboarding frauds has grown exponentially. According to a report by Bnn Bloomberg, NASA incurred a loss of $700 million due to the supply of faulty aluminum products. To avoid this income and productivity loss, businesses need to use solutions that can help verify vendors during the onboarding process. Vendor onboarding documents and ID verification are crucial for mitigating fraud.

DIRO’s online verification solution can reduce fraud, improve business relations and improve productivity. DIRO’s solution can verify vendor documents in an instant and assist in complying with AML regulations. The output of the solution is a court-admissible document with forensic data and a digital hash that makes the documents immutable. Being able to differentiate between legit and fake vendors during the first part of the onboarding process is something that every business needs.

Onboarding a vendor without having proper guidelines in place can severely impact your business. Vendor onboarding fraud and the consequences that come along can be fatal for a business. So, how can you know the vendor you’re onboarding is the right is not a fraud?

Every business regardless of its nature of business needs to have a vendor onboarding checklist. To avoid instances of fraud that can harm your business, you need to follow the required due diligence.

One of the biggest parts of vendor onboarding is to make sure that you’re keeping up with all the changing laws, rules, and regulations.

What is Vendor Onboarding?

Vendor onboarding is the process of collecting all the crucial information that you need to approve a vendor for your organization. A vendor allows businesses to buy supplies without having to go through a long process. Vendors in turn issue invoices for businesses. Let’s say you onboarded a fraudulent vendor, they’ll end up issuing invoices for things you haven’t purchased. This is how most fraudulent vendors operate and earn money.

The vendor onboarding process needs to have an ideal checklist. By following the checklist, every business can make sure they’re onboarding the right vendor.

Importance of Vendor Onboarding Process

Vendor onboarding is the first step of the vendor management process. If a business doesn’t have a vendor onboarding process, it can become a part of fraud. When you follow a vendor onboarding checklist, you can reduce the risk of fraud, eliminate additional costs, and achieve a higher ROI.

When you build a vendor onboarding process for your business, it becomes easy to avoid pitfalls that come along with bad vendor management.

Not just customers, you also need to nurture relationships with your vendors. A well-thought-out vendor onboarding process can help you make your relationships with vendors strong. It also offers other benefits:

Reduce or eliminate risks
Streamlined process and increased level of efficiency
Ensure compliance with regulatory guidelines
Build a positive business reputation in the industry
Boost ROI
Reduce redundancies and mistakes
Track business data and workflows
Automate basic tasks

How to Build Your Vendor Onboarding Process?

To start building your vendor onboarding process, you need to keep a couple of things in mind:

Evaluation and Approval Process: Every business should have an evaluation and approval process while onboarding vendors.
Setting Up Requirements and Expectations: Set up clear policies and expectations to make sure there’s no confusion between all the moving parts.
Developing Process for Strategic Supplier Partnerships: Strategic partnerships hold a lot of value for businesses. You need to create a separate onboarding process for all your strategic partners.
Establish a Communication System: Having a clear line of communication matters a lot. Knowing you can reach out to your vendors at any given time is helpful in eliminating redundancies, mistakes, and errors. Plus, it helps in building stronger relationships with customers.

Vendor Onboarding Checklist

To make the process easier, you need to make sure that you’re not missing out on any crucial factors.

Here’s a vendor onboarding checklist you can use.

1. Evaluate Risk Level

Hiring a vendor that has a poor track record can be risky. You need to evaluate the level of risk a vendor brings along with them. Here’s how you can do so:

Check business product and service records.
Check creditworthiness.
Assess vendor compliance level with current regulations.
Ask the vendor to sign an ethical code of conduct.
Make backup plans.

2. Collect Information About Products & Services Offered

Expected nature, volume, and how frequently you need the supplies.
Ask for product and service specifications.
Ask for requirements for placing an order, and the format of order placement.
Have a clear conversation about pricing and discounts.
Clear out payment terms beforehand.
Figure out the delivery process and logistics.
Supplier training requirements or orientation sessions.

3. Collect Information About Vendors

Ask for the registered name, address, and contact details.
Ask for licenses, insurance, and other important documents.
Vendor bank account verification for creditworthiness check.
Contact information of vendor representatives.

4. Make all Information Available for Internal Use

All the vendor information should be available for access by some teams, including:

Accounting teams
Purchasing teams
Warehousing and inventory control

5. Share Necessary Information for Vendors

Your vendors should have all the necessary information when they enter into a relationship with a business.

Here’s a list of what you should share with vendors:

Provide correct invoicing details.
A record of all the agreed terms and send them for confirmation.
Provide contact details for purchasing managers and logistics teams.
Provide training if needed.

Importance of Proof of Address Verification In Vendor Onboarding

Proof of address verification in vendor onboarding is a step that a lot of businesses ignore. Verifying where a business comes from plays an important role in figuring out if they’re genuine or not.

Let’s say there’s a location that’s famous for having risky vendors, or there’s a location that your business doesn’t serve. How would you know the vendor is not from the location?

That’s where online proof of address verification comes in. When you verify a vendor’s proof of address, you can make sure you’re not getting into a relationship with a fake vendor.

DIRO online proof of address verification can help you verify the address of your vendors by verifying the documents provided. DIRO provides 100% accurate results instantly, using proprietary technology.