Vendor due diligence is an aspect of third-party risk management that more and more companies are beginning to carry out. By conducting research on potential vendors before getting too deeply involved, companies can save themselves many headaches down the road.
Yet many companies may still wonder if anything more than a cursory glance on the company’s site is needed. Others may wonder which are the vendor due diligence best practices to identify third-party risks.
Understanding the importance of vendor due diligence, as well as how to carry it out, can greatly benefit your company in the long run. Read on to see why more in-depth due diligence is key to protecting your company’s bottom line.
1. It Will Prevent Losses
By doing your homework on a potential vendor, the company should be able if a vendor’s materials and/or services are within budget. It is easy to begin work with a vendor, simply because they have the products you need and can get them to you quickly. However, without doing any due diligence, you aren’t sure if you’re getting the best possible prices.
Companies can compare prices by getting quotes from different vendors. Despite being time-consuming, as your team will need to pass the information on to each vendor to get an accurate quote, it is important to be descriptive and share the same information with each vendor.
It is especially important to conduct due diligence on long-term vendors. Price shopping still matters when it comes to one-time purchases, but a one-time purchase that wasn’t the lowest possible price won’t be as big a blow as multiple purchases from a vendor charging too much.
2. It Will Prevent Shipping Delays
Many companies opt to work with vendors relatively close to their company. By staying local, companies don’t have to worry as much about receiving late shipments. This model is ideal for companies that work in cities and other densely-populated areas where there are sure to be vendors nearby.
Oftentimes, businesses will already have an idea of which vendors they want to work with, simply from word of mouth. Businesses should still conduct due diligence even on local vendors, but the close proximity to the vendor can save the company some headaches.
However, working strictly with local vendors isn’t always an option for businesses kyc, especially ones that require freight deliveries or specialized items. Therefore, any companies that must do business with vendors that are in different cities, states, or even countries should do their research before beginning a business relationship with the said vendor.
Companies can check to see where a vendor is located to see if they’re too far away. The easiest way to do this is by checking the vendor’s site. They should have all locations and their headquarters listed on their website, as well as customer service numbers or forms to help you get more information.
Oftentimes, it is a good rule of thumb, if possible, to avoid any vendors that are farther than a reasonable driving distance from your business.
3. Your Company Will Get Better Customer Service
Due diligence isn’t solely about getting the best prices or the fastest deliveries – it’s also about working with professional, civil individuals who will make every purchase a smooth process.
A good way to see if a vendor provides quality customer service is by checking out its online reviews. Many reputable vendors that have been in business for some time will have pages on Yelp, Glassdoor, or other similar review sites.
There, your company will be able to read honest opinions that past and present clients have about the vendor, and what their experience working with them was like.
This information is crucial when it comes to deciding whether or not to work with a vendor. By seeing plainly what others’ past purchasing experiences have been like, your company can decide if that is a vendor you wish to work with. Doing so can help reduce the number of vendor disputes your team has to untangle.
4. Research Your Current Vendors
Even after you’ve struck up a business relationship with a vendor, it’s still important for your company to still conduct due diligence on them. Using the above methods, your team should be able to weed out any potentially problematic vendors.
This is especially the case when it comes to comparing prices between vendors. Once you’re settled in with a vendor, it may seem like unnecessary work to conduct due diligence on them. Yet it’s never too late to conduct due diligence on your vendors.
Assigning a team to carry out this research so that you can compare prices can help you make better decisions regarding your company’s budget.
Other Ways To Conduct Due Diligence
While using the vendor’s site, review sites, and quote collecting are two of the most common ways to conduct due diligence, there are other ways your team can go about it.
One way for your team to conduct due diligence is by visiting the vendor’s Better Business Bureau page. By using their page, your team will be able to see the grade that the vendor has been given by the BBB, as well as any complaints that have been filed against them.
Any and all information should then be collected and stored in a database or shared files. Just like with any aspect of risk management, it is important to make the information easily accessible to all relevant members of your team.
In addition, just like with a risk register, your company’s vendor database should be frequently updated. All new vendors should be added, and vendors with whom the company’s business relationship has ended should also be marked. Additional basic information on the vendors, such as contact information and price ranges should also be included.
Overall, vendor due diligence is an important part of third-party risk management. By staying on top of your company’s expenses, your team can save money in the company’s budget, as well as minimize the number of hiccups you’ll have to deal with from vendors.