Managing vendors and contracts has emerged as a key aspect of financial strategy for businesses in today's complex economic environment. It is increasingly clear that poor vendor and contract lifecycle management can lead to substantial financial losses.
The World Commerce and Contracting Association states that contract erosion, which is the value lost in contracting that directly impacts revenue figures is on average 8.6%.
CFOs and Procurement teams can stop bleeding cash through their vendors by implementing Vendor and Contract Lifecycle Management (VCLM) best practices.
That’s what we do here at Gatekeeper.
This involves increasing visibility across vendor contracts and consolidating vendor data into a central source of truth. Doing this can help identify areas to reduce spending, such as duplicate software spend.
Another critical aspect is control in vendor management that aligns with the organisation's financial goals.
Recently, we teamed up with NetSuite and Funding Circle to discuss how a more informed approach to vendor and contract risk management can prevent organisations from bleeding cash.
This article will discuss some of the conversation points from that webinar with three critical areas to address to prevent such losses:
- Visibility and control
- Streamlining processes
- Investment in technology
1. Visibility and Control
The first step to preventing cash loss through vendors is by gaining visibility and control over vendors and their contracts. This involves:
- Knowing where all contracts are
- Understanding contract terms
- Contract renewal dates being documented
- Avoiding auto-renewals via contract renewal processes
- Onboarding all vendors through a business-approved process
Businesses often aren't even aware that certain contracts exist, let alone their terms.
There is too often a lack of awareness about which vendors have commitments, who needs to be paid, who has contracts, or even who has overdue work.
A proper vendor onboarding workflow can be implemented to ensure that only vetted vendors are introduced to the business. This limits the risk of fraudulent vendors infiltrating your organisation and issuing fraudulent invoices.
Integrating this process with financial systems like NetSuite provides a clear audit trail and safeguards against financial discrepancies.
From here, Finance teams can access live and up-to-date vendor data to ensure payments are made to trusted vendors with contracts in place.
2. Streamlining Processes
The second critical area to address is the streamlining of processes.
If you don’t have a central place for making vendor or contract requests, you’ll likely have a myriad of email, slack, and in-person requests.
This lack of consistency can lead to confusion, missed opportunities for negotiation, and ultimately, financial loss.
Streamlining these processes, establishing clear procedures, and ensuring that all teams are aligned with the CFO's objectives can lead to more efficient vendor and contract management.
This will all ladder up into cost savings.
3. Investment in Technology
Finally, investment in technology is crucial for businesses aiming to stop bleeding cash through their vendors.
Technology can provide the tools necessary for more effective contract management. Consider our VCLM platform where you can:
- Onboard all of your vendors in one place.
- Carry out 24/7/365 cyber and credit risk monitoring.
- Handle the end-to-end contract management process
Tech can also automate many manual, time-consuming processes, freeing up staff to focus on more strategic tasks.
The time saved on a Full Time Employee is often overlooked as a saving and a benefit, but this should be a major incentive for using tech and preventing revenue loss.
While this requires an upfront investment, the potential for cost savings and increased efficiency makes it worthwhile.
Closing Thoughts
CFOs and procurement teams can stop bleeding cash through their vendors by focusing on visibility and control, streamlining processes, and investing in technology.
Each of these steps contributes to more effective vendor and contract lifecycle management, leading to cost savings and improved financial performance.
It's important to remember that managing vendors and contracts is a company-wide responsibility, and achieving success in this area requires a collaborative, strategic approach.
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