A Beginner's Guide to Vendor Management
From cloud services to accounting platforms to project management software, burgeoning businesses are reliant on a variety of services across multiple vendors to operate and grow.
After all, you’re not here to reinvent the wheel.
However, without a proper way to manage these vendors, your purchases and renewals can get messy. From overpaying vendors to buying duplicate subscriptions, you risk getting a lot of money stuck in a swamp of software-as-a-service (SaaS) subscriptions.
To that end, we’ve put together this beginner’s guide on vendor management. Below, we’ll cover:
- What is vendor management
- Controlling your vendor spend
- License and policy management
- Gaining visibility over all accounts
- Vendor management beyond software
- How to get the most out of your vendor management system
What Is Vendor Management?
At its core, the vendor management process is simply the act of viewing and controlling the products, supplies, and services you purchase to operate your business. A top-notch vendor management program will effectively allow you to:
- Have full visibility and control of your software stack and supply chain and know how each component benefits your business.
- Modify vendors and contracts according to real-time data on spending and service licenses.
- Scale and streamline your vendors as you grow your business.
- Maintain financial and legal compliance, especially when using cloud-based services.
Furthermore, an effective vendor management program will shield your business from the common downsides of scaling with multiple vendors:
- Inefficient spending (overpaying vendors or failing to receive the full extent of a vendor’s offering)
- Redundant SaaS purchases
- Poor expense management, which can make tax season especially tricky
A proper vendor management process will take you far. All you need is the right support. Read on to learn how to manage your vendor performance in a way that works.
Control Your Spend
One of the most crucial facets of well-designed vendor management is control over spending patterns, SaaS procurement, and licenses. Here’s why strategic control over your vendor relationships is ideal for any business:
- More efficient use of capital by closely managing the SaaS procurement process, and therefore avoiding redundant or low-value purchases.
- Keep up with IT governance standards by ensuring regulatory compliance when managing your software stack.
- Adhere to spending limits and avoid overpaying vendors—especially when it comes to SaaS—by understanding how much you spend.
- Optimize SaaS spending, accessibility, and functionality by identifying and modifying software updates and license holders.
Alongside added spending control, vendor management grants you a top-down view of existing licenses and policies within your company.
A business that spends effectively will also know how to manage existing software licenses and acquire new ones as they grow.
Vendor management helps companies consider how many licenses they own at the time of a given purchase and compare it to how many they may need in the future. This process is especially vital when a business is:
- Evaluating a new vendor, particularly if it is offering a SaaS product
- Considering renewing a license, upgrading, or purchasing an upsell
Doing so is crucial to keeping license acquisition under control. By keeping a close eye on license usage, administrators can avoid sinking money on unnecessary services. Larger companies greatly benefit from this practice. Due to the frequent personnel changes inherent in enterprises, licenses that were bought by ex-employees often go unused and undetected.
On top of monitoring license ownership across your business, automated vendor management workflows allow you to:
- Manage software upgrades and updates
- Identify the best prices and value across various upgrading and upsell offers
- Automatically document and organize software licenses
- Establish automatic controls and restrictions on software access depending on user credentials and place within the organization
Top-notch vendor management means you only pay for what you actually use. And best-in-brand license monitoring makes sure you’re using everything you pay for to its fullest potential.
Gain More Visibility on Your Spend
Vendor management offers unprecedented visibility into a rapidly-growing spending category in most businesses. In fact, 38% of companies run almost entirely on SaaS, with SaaS spending projected to double by 2020 across multiple verticals.
That type of spending is not something you want to go into blind.
With the right vendor management system, you’ll have the visibility you need to gain valuable, money-saving insights like:
- Comprehensive details on all existing SaaS tools in your company
- The subscription type, payment frequency, total spent, and automatic renewal dates for each product
- License ownership across your software stack
- Features and functionality of every tool in your SaaS suite
Visibility is only useful when it’s easy to access and easy to understand. The ideal vendor management software will keep all relevant data in a central location and make them user-friendly and searchable.
Vendor Management Beyond Software
While some companies are thriving under almost entirely cloud-based operations, most still rely on vendors outside the digital world for support. These areas may include supply chains, consulting services, transportation, food services, and more. That’s why your vendor management strategy can’t stop at SaaS.
When vendor risk management crosses over into the non-software world, it not only becomes about visibility and control, but also about human interaction. For optimized vendor management services across all fronts, make sure you adhere to these best practices:
- Study up on contract negotiation to ensure you’re getting the best deal from each vendor.
- Maintain a cordial relationship with vendor representatives—remembering a detail or two about their lives doesn’t hurt, either.
- Carefully choose your vendors based on both quality of service and demeanor. A vendor with a positive company culture will help enrich yours. The alternative can lead to poor communication, conflict, and unsatisfactory services.
- Vet the vendors as you would consultants. Their ability to effectively problem solve and communicate will make a world of difference for your experience with that vendor.
- Avoid signing contracts with vendors that want to limit your relationship with other vendors. Overly restrictive contracts can spell disaster for growing businesses.
Getting the Most Out of Vendor Management
Visibility and control of your SaaS spending are your lemons. Now, it’s time to make lemonade.
A well-designed vendor risk management system will also feature automated controls and communication programs that allow you to optimize your vendor spending based on the information at your disposal.
The first and best feature? A vendor management system attached directly to your corporate card.
When you find a corporate card program with a built-in spend and vendor management, suddenly, your financial world opens up. Here’s what makes integrated vendor management ideal for businesses:
- Real-time updates on subscription, software, and licensing changes allow you to optimize your vendor spending and SaaS utilization.
- By eliminating manual SaaS management, you’ll never let an upgrade, update, or license change slip through the cracks.
- You can avoid surprise renewal payments by receiving automatic alerts to upcoming SaaS bills.
- Get instant alerts when new vendors are added and control your team’s SaaS spend to eliminate wasted or duplicated vendor spending.
Ramp Knows Vendor Management
Ramp’s robust spend management platform also comes with a vendor management feature that improves your bottom line and integrates directly with the charge card. With Ramp, you can manage every vendor from one, user-friendly Control Center, predict every recurring expense, and gain full control over your SaaS spending. Because this predicted vendor management happens automatically with every swipe, you can say goodbye to manual data entry.
Here’s how Ramp’s vendor management tools and charge card program help you change the game:
- Spot duplicate spending and identify opportunities to consolidate SaaS subscriptions
- Automate SaaS procurement
- Integrate with Slack for real-time spend approvals and decision making
- Set controls on cards for specific merchants and lock cards on your terms
- Use spending data to reduce waste like missing cash back or overpaying for subscriptions
- Offers over $175,000 in partner deals
Why not start using Ramp today? A faster, more robust way to track your spend, manage vendors, and save money is waiting.