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Vendor management is one part of running a business that’s often viewed as a hassle or overlooked. Navigating a seemingly endless collection of vendor contracts, tracking down every granular purchase, and planning for the future are difficult enough for just a few vendors. But those challenges multiply and compound as your list of partners grows alongside your business. The vendor management process can lead to serious issues (like data breaches) if you don’t stay organized with the right tools.

But vendor management doesn’t have to be difficult. In fact, it’s an opportunity to streamline and gain visibility into some of your company's key operating expenses. Once you've created an effective vendor management process, you'll be able to keep finances under control and reduce any data security risks. This guide breaks down three vendor management best practices to help you meet your business goals and keep stakeholders up-to-date:

1. Strategically managing vendor relationships

Your organization’s vendor management (also known as contract management or supplier management) process begins with vendor selection. It’s imperative to work with vendors with whom you can form a mutually beneficial partnership. And setting yourself up for long-term success begins with carefully screening vendors before you enter contract negotiations.

When determining who to work with, narrow your search with criteria such as:

  • Fit – The most important part of a vendor relationship is what they offer you. In practice, that means understanding the granular details of whatever goods and services they will be supplying, down to specific scale, configurations, and limitations.
  • Price – A key part of the “what” you’ll be getting from any individual vendor is how much it will cost. Specifically, you need to be sure what rates you are being charged for goods and services, how often, and how payment will work.
  • Risk – Finally, you need to consider the potential risks relevant to any of your vendor options. How stable is the company—is there any volatility in its business model? How stable are its strategic partnerships with other companies? These questions are critical before you proceed to the vendor onboarding process.

Once you’ve narrowed down your short list, you can begin working with a number of vendors to sketch out contracts that work for both parties. Importantly, selection doesn’t end when a contract begins; you need to maintain strong relationships that last over the long-term.

Vendor relationship management

Mutually beneficial vendor relationships are tough to maintain. You’ll need to cultivate management skills, such as transparency in communication and flexibility in vendor negotiations.

A key component of vendor relationship management is to be clear about your company’s needs and expectations. Likewise, command the same level of transparency from vendors who wish to work with you.

When drafting vendor management policies, balance your own interests against those of your vendors. You can think of concessions as investments. Accommodating a request that’s a small disadvantage for you but a consequential benefit for them can pay dividends for both parties in the long-run; your vendor will be more likely to make valuable accommodations for you down the line.

However, while maintaining good vendor relationships is critical, it’s also important that you monitor vendor performance to ensure you’re getting your money’s worth. Tracking metrics and key performance indicators (KPIs) over time and using tools like vendor scorecards can help ensure your vendors meet a high quality standard throughout the vendor lifecycle.

Reviewing vendor performance like this is also critical for risk management and mitigation. By conducting vendor risk assessments (and especially doing your due diligence when onboarding new vendors), you can identify potential threats in your supply chain and help ensure information security.

2. Monitor and control vendor spend

Strong contractual and mutually beneficial vendor relationships are just the tip of the vendor management iceberg. Once a relationship with a vendor is formed and you start paying them for goods and services, it’s also important to track vendor spend.

Herein lies one of the toughest challenges for businesses of all sizes: keeping track of spend across all your vendors. To adequately monitor vendor spend, you need to track:

  • How much money is being spent per vendor and on all vendors, collectively
  • What goods or services you’re receiving from each vendor
  • What payment methods are used (cash or credit; which accounts)
  • What is the frequency of payments to vendors (weekly, monthly, annually)

Importantly, all this data needs to be accessible for both quick review and in-depth analysis. That means tagging each procurement data point with categories that can be used to isolate variables and determine trends. To control spend, you don’t just need to track it; you need to analyze the actual performance of your vendors against the amount spent to get a sense of ROI.

Vendor management best practices

Given the challenges this detailed monitoring can entail, there’s no shortage of vendor management software and other solutions available to help track vendor spend and performance. However, adding yet another single-use vendor to your list isn’t always the best solution.

There are often other creative ways to tackle strategic vendor management using other tools already available to you. For example, the payment method you use may already harbor powerful analytical tools. Smart corporate cards often pair the flexibility of a line of credit with beneficial tools like a spend management platform or even a vendor management platform.

With vendor management built into your card, you can:

  • Create multiple cards, each tied to a specific vendor (or group of service providers)
  • Limit use of a particular card to one or more employees for tighter control
  • Real-time visibility of all spend, broken down by card, employee, vendor, etc.
  • Keep track of vendor contracts so that you can review details at a glance

Consider what your card can do for you before adding yet another vendor to your vendor list.

3. Be proactive, not reactive

In planning and enacting your vendor management strategy, you need to be ready for all possible scenarios. Before a crisis occurs, you need to be able to get in front of it.

In practice, that means you need to be proactive. It’s not enough to just monitor and control the amount of money spent on all forms of vendors, including physical goods, in-person services, and, most importantly, software-as-a-service. In order to avoid overpaying for duplicate or unused services, you’ll need predictive analysis (detailed below).

First, why is SaaS management most important? Because of the ways it can get out of control:

  • SaaS creep – When SaaS is no longer being used but you’re still paying for it, whether that’s due to change of personnel, free-to-subscription auto-purchase, or other miscommunication.
  • Shadow IT – When different departments or individuals unnecessarily “double dip” by purchasing multiple subscriptions of a software when just one company-wide subscription would suffice.

In an increasingly digital environment, your company will accumulate a larger and more complicated list of vendors. SaaS and IT sprawl can significantly impact your bottom line and profitability. As such, simplifying your vendor management systems best practices is imperative.

Streamline procurement and freezes

In practice, proactivity is only possible with the most powerful analytical tools. You’ll need to centralize all your vendor spend data into one location by using vendor management. And ideally, you and your team should have the ability to approve (and freeze) all procurement right from that very dashboard.

Furthermore, the most powerful spend management platforms should provide predictive analysis, which identifies any and all excess spend (SaaS creep, etc.) and notifies you before the expense occurs.

Ideally, your platform shouldn’t just collect all your vendor spend into one place—it should streamline all expenditures in one centralized location. It should also integrate with existing accounting and messaging systems to further facilitate procurement planning, savings, and bookkeeping.

Ramp: A more powerful and automated vendor management tool

At Ramp, we understand how challenging managing vendor relationships can be for businesses. That’s why we built out our Vendor Management dashboard to give you a more holistic view of all your vendor data and contracts.



With Ramp vendor management software, you get a single view of all of your vendor data and contracts. All of your transactions are automatically tracked against businesses paid by card and Bill Pay, which makes it easy to analyze spend and discover new insights. Ramp will also automatically extract key details from each contract you upload to the platform, which gives you a unique level of visibility without all of the tedious data entry.

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Content Lead, Ramp
Fiona writes about B2B growth strategies and digital marketing. Prior to Ramp, she led content teams at Google and Intercom. Fiona graduated from UC Berkeley with a degree in English. Outside of work, she spends time dreaming about hiking the Pacific Crest Trail one day.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.


When should I start onboarding vendors?

You should only begin onboarding third-party vendors after you’ve defined your project goals, set a budget, and established solid vendor management and review procedures. It’s also important to interview and get quotes from multiple vendors before negotiating a contract, so you can truly choose the best option for your business.

What makes a good vendor manager?

A good vendor manager understands that there are humans behind every contact point in the vendor management process. They focus on maintaining proactive and healthy relationships with vendors so that, if an issue arises, vendors will feel comfortable addressing them confidently and in a timely manner.

What is a vendor scorecard?

A vendor scorecard is a metrics-based report that businesses can use to evaluate vendor performance over time. Using scorecards is a vendor management practice that helps you spot performance gaps and determine ROI for your supplier spend, all while eliminating kinks in the supply chain.

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