Vendor management systems explained & best software options in 2024

Your employees only represent 58% of workforce spend, with the rest goiƒng to external resources, according to recent SAP research. That’s a clear hint that vendor management and supplier management are going to take up more of your finance team’s time in the years ahead.

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While many finance leaders, senior HR executives, and SMB owners know procurement and vendor management are key operational responsibilities, many are left with questions about how to best formalize this process. Enter vendor management systems, or VMS.

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In this article, we'll explain what these systems do, what features finance teams and owners will likely value the most, and how automation features can improve your operational efficiency.

What are vendor management systems (VMS)?

A vendor management system automates all vendor-related activities after the procurement process. These activities include documenting vendor details, collecting a W9, and recording vendor data in a way that makes it easily accessible and discoverable by stakeholders across your business. 

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Automating a vendor management workflow has become critical for businesses of all sizes. As businesses grow, so do the number of tools their employees need to do their jobs effectively. BetterCloud recently reported that the average company uses 130 SaaS applications. Managing such a high volume of vendors manually is virtually impossible for even the most experienced finance teams. This explosion in SaaS spending has surfaced two key vendor management challenges:

1. No single source of truth: Tracking and managing all the associated vendor information, contracts, and documents often falls on the finance team, a process that’s riddled with manual work, fragmented data sources, and a lot of much time spent on admin.
2. Overspending: SaaS companies are notorious for their opaque pricing. This makes it difficult for finance teams to understand if the quoted price or the price they receive at renewal is fair.

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These realities have created an urgent need for vendor management systems that provide a single view into every vendor detail, document, and transaction. Without easy access to these resources, it’s virtually impossible for any finance team to make confident purchasing or renewal decisions.

How can VMS systems help me?

A solid vendor management platform will help you audit—and control—who supplies your business. You’ll be able to modify contracts based on actual needs. And you’ll be able to ensure vendor and supplier spending reflects the actual service your teams experience. Many of these vendor management workflows can be automated, including:

Measuring vendor performance

Businesses often turn to contingent workers and external service providers for specific services they can’t access in-house due to bandwidth or budgetary constraints. But the risk of engaging and onboarding outside parties needs to be balanced with the rewards of high performance. The best VMS will help the business understand how vendors and suppliers are delivering on their promises. They will help you see:

• If project milestones are being achieved
• If the work or service quality is as expected
• If phased payments are being released too soon

Preventing shadow IT through automated insights

Shadow IT is when unauthorized technology solutions are bought and used for various business processes across your company. Shadow IT can go unnoticed at first, but as it becomes more widespread, it can cause significant problems, such as overspending, IT inefficiencies, and data risks. The right VMS will allow you to automatically identify and collect all your company’s vendors and contract owners in one place, and keep them updated in real-time.

Streamlining vendor payments

B2B payments are a complex task for modern accounts payable teams. Decades ago, most people businesses had to pay were at least somewhat local. It was common for vendors to be in the same building as you or at the very least on the same continent. All that has changed with:

• The growth of highly-skilled international supplier bases
• The emergence of alternative payment methods
• The regulatory challenges of cross-border payments

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A vendor management solution that ‘talks to’ or complements your financial management software can help to streamline B2B payments and rein in some of this complexity.

Automatically tracking vendor spend

Keeping track of spending across all your vendors becomes harder and harder as your business scales. Finance teams have the unenviable task of staying on top of this growth to ensure that spending is tracked. This is why good vendor management software can prove so useful. Structured vendor management lets finance teams see:

• How much money is being spent on individual vendors and in total
• Accurate explanations of the goods or services you’re paying for
• How these payments are being made, whether that is by card, bank, or wire transfer
• Which vendors get paid the most often and at what intervals

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A good VMS will help you track vendor spending in a way that makes it easier to take action on negative or positive trends, like overpayment or value-for-money. And that should put you in a stronger position during any vendor negotiations.

Managing third-party risks

For CFOs and heads of finance, contingent workforce management is a key aspect of risk management. Because if one of your vendors makes a mistake, it's your business that often has to face the consequences, whether that’s regulatory difficulties, customer complaints, or negative brand impacts. A VMS can help you prevent this by ensuring you have all the financial and tax documents that vendors need to provide, along with any licenses, certificates, and insurances.

Complying with regulations

When it comes to external freelancers and vendors, doing some initial due diligence is not enough. For example, the Office of the Comptroller of the Currency requires all banks to know who their vendors are and to manage any third-party risks that come from working with external suppliers. That means monitoring:

• The strengths of individual controls
• Compliance with laws for service level agreements
• Performance metrics and other contractual terms

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Critical vendors should be risk assessed at least annually—and a VMS can help simplify compliance management, contract management, and much more.

Look out for these features when choosing your VMS tools

If you’re a seasoned head of finance, you already know all about vendor management best practices. You’ll also know which VMS features do little to support these approaches and which are mere window dressing. A modern VMS should help you:

• See important vendor information and supplier costs in real-time
• Check which teams depend most on outsourcing and contingent labor
• Prevent payment bottlenecks at month or quarter-end

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Let’s look at some other features that can prove useful to finance teams working on high-workload teams.

Centralized procurement and approval

When Ramp launched its vendor management platform, we mentioned that most of our customers are managing hundreds of subscriptions at once. And that’s just subscriptions. Many are also managing high volumes of vendors and suppliers, too. Procurement can become unwieldy if it’s not bound by a formal process that finance teams and department heads can quickly (and easily) follow. Look for VMS that helps you centralize and simplify requests and approval processes in minutes, not weeks.

Automated and real-time vendor expense tracking

Leading VMS will help businesses incentivize savings and value-for-money across the business, whether that’s in external consultant spend, SaaS subscriptions, or legal services. Looks for a VMS that will enable your team to:

• Stop unapproved procurement and vendor negotiations before they go too far, with category spending controls
• Help finance teams to close their books promptly, with time-saving accounting integrations and proper coding to help you identify which vendors are providing value for money or where others may be underperforming against agreed deliverables  

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Ideally, you can then use real-time vendor spending data to do accurate reporting and financial forecasting.

Auto-categorize vendors

It’s getting harder to know about every vendor and supplier your teams have procured. That’s not good for heads of finance and their teams, because it sets the scene for wasteful spending. Or worse, duplicate spending. This is why categorizing vendors is so important. A good VMS will help you be more proactive with vendor management, by categorizing vendors by their services and results.

Block certain vendor spend with pre-set rules

A modern VMS should be integrated with your corporate card so you can set pre-approved spending limits to automatically enforce your company’s expense policies and keep supplier and vendor spending in check. So look out for the ability to set weekly, monthly, and quarterly spend limits, too.

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This is critical for finance teams working in high-growth companies, where demand for vendor support can excel and outpace current processes quickly. It’s also key for SMB owners, who may need to quickly scale up or down their vendor lists based on seasonal demand. For example, with Ramp, you can issue vendor-specific virtual cards to control vendor spending at the category level (e.g. no spending on certain marketing activities or capped outlay on insurances). You can also completely block (or limit) spending on individual vendors, too.

11 best vendor management services to consider

Now you know what to look for, here are 11 vendor management system examples to consider.

1. Ramp

Our vendor management platform is the only one that's fully integrated with your corporate card, so you can save an average of 5% and receive automatic notifications about cost-saving opportunities. 

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Ramp’s automated vendor management platform can help your business to simplify and centralize procurement with a seamless approval process that saves your finance team lots of time, and keeps your internal project managers accountable. When it’s time to renew with a vendor, Ramp’s Price Intelligence feature allows you to see how much other businesses are paying for the exact same software product.

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With Ramp’s platform, you can identify and collect all vendors and contract owners in one place, get notified when the next payment is due, and track how much you’ve ever spent with each vendor.

2. Precoro

Precoro promises to provide cost-effective and easy-to-use procurement solutions to help companies reduce administrative headaches, lower costs, and increase productivity. Precoro’s features include purchases requests, approval workflows, budget management, and inventory.

3. SAP Fieldglass

SAP Fieldglass is a cloud-based VMS that helps organizations find, engage, manage, and pay external workforces. SAP was named a Leader in Gartner’s Magic Quadrant for Procure-to-Pay Suites in 2021.

4. Gatekeeper

Gatekeeper describes itself as “an all-in-one vendor lifecycle management platform” built on vendor management automation, artificial intelligence, and vendor-facing features. Gatekeeper provides an Employee Portal for internal users to request new vendors and compliance reviews, along with a vendor portal for managing tasks like non-disclosure agreements (NDAs) and information security reviews.

5. Beeline

According to business technology review site, Trustradius, Beeline is a workforce platform with a dataset encompassing more than 30 million workers and more than $700 billion in talent spend.

6. Onspring

With an offering pitched more toward vendor risk management, Onspring helps businesses manage ‘diverse vendor sets.’ Their third-party risk management solution (TPRM) supports customers with third-party risk assessments and mitigation activities.

7. NContracts

Much like Onspring, NContracts promised to help businesses take the risk out of vendor management. NContracts promises to help businesses stay informed and aware about vendors’ activities, with tools to monitor and communicate any risks to key internal and external stakeholders.

8. Venminder

Venminder describes itself as a recognized leader of third-party risk management. The platform allows businesses to organize, track and report findings on vendors throughout the lifecycle of the relationship. The company reports that its clients use the software for anywhere from 10 to more than 7000 vendor relationships.

9. Genuity

Genuity helps businesses to manage IT spending, software usage, contracts, and compliance. Genuity also promises to help businesses understand more about their cloud, license, and product usage, and any associated billing trends.

10. Oracle Fusion Cloud Procurement

Oracle describes its Fusion Cloud Procurement tool as ‘an integrated source-to-settle suite’ for strategic sourcing, better supplier relationship management, and simplified buying. Customers include FedEx, HSBC, and the University of Wyoming.

11. PRM360

The PRM360 website describes this platform as a ‘robust cloud-based procurement software solution’ for procure-to-pay processes. The platform helps businesses to create requisitions, manage inventory, track purchase orders (POs), and ensure vendors comply with relevant regulations.

Ramp: Vendor management made easy through automation

We know vendor management is a difficult part of running a business. And in the early days, prioritizing vendor contracts, supplier purchases, and cost-savings can seem like a needless activity. But when the number of vendors grows rapidly—and you start to deal with external partners based all across the world—you can begin to see that sound vendor management is an asset, not a liability.

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Ask us how our predictive vendor management and real-time spend analysis can help you handle all vendor relationships with composure and certainty. With Ramp, you can:

• Stop shadow IT
• Track all vendor spend
• Analyze upcoming spend
• Make the procurement process smoother
• Control vendor spending with cards
• Get more favorable vendor contracts

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Time for a faster way to manage your vendors and save money? Start using Ramp today.