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Vendor Management

WP 06.21.2010

It may be understandable that with many of the issues taking place in the industry today that vendor management might be far priority list. But should it?

With a defined plan the organization can reap the benefits. Tracking vendor expenses, contracts and service level agreements is a must for any financial institution, but that is often the exception and not the rule. This leads to vendor being in control and the company often accepting inferior quality and higher costs by allowing this to happen.

Here are a few basic requirements to fulfill a productive vendor management program within your institution:

  • Utilize technology. There are several inexpensive tracking programs available. At the very least use an Excel spreadsheet.
  • Assign ownership. This is imperative. Whether it's located in Retail, Procurement or Operations does not matter. What matters is it is assigned.
  • Contract negotiation. There should never be a contract that automatically renews without consent from the organization. The owner should work with the resident expert to make sure all items are addressed within the formal document.
  • Contract terms. Remove any verbiage or clauses relating to automatic renewal terms.
  • Use of Request for Proposals (RFPs). This option should be used periodically to ensure the company is getting optimal service and price.
  • Contracts. Each contract should be scanned or filed in one central location.
  • Insurance. Make sure all vendors have up to date insurance policies and are scanned or filed with the contracts.
  • Vendor reporting. Documentation should be received electronically no less than quarterly.
  • Service level agreements. These agreements should be a part of your vendor management program and tracked aggressively.
  • Vendor meetings. Major vendors should be met with at least annually to review the program and ways to improve.
  • Vendor invoices. Invoices should be consolidated and scrutinized for accuracy.
  • Additional contracts. Many companies do not feel it is necessary to have contracts with minor vendors, such as, janitorial, landscaping, snow removal. There should be an annual spending floor determined at which contracts are provided I.E. $5,000.
  • Vendor consolidation. The organization should determine the best vendors to utilize and consolidate, where possible. This will reduce the amount of involvement from the owner and enhance the dollars spent for further discounts. Branches should not be able to add new vendors without prior approval.
  • General Ledger. Many organizations dissect vendor expenses through expanded GL categories for monitoring.

After your organization sets up the program initially, it will be rewarded with better vendor service and lower costs. And you will wonder why you did not do it sooner.