5 Key Questions for Vetting and Setting Up Vendors in Accounting
Posted on July 11, 2016 by Liang McIntosh-Yee
Businesses rely on their vendors/suppliers to provide products or services in a timely manner. In many cases, a business needs those products or services to help its own customers. If something breaks down in the supply chain process, it could interfere with their ability to run their own operations.
For an accounting department, the right vendors makes life easier in many ways. Instead of chasing down invoices from vendors or trying to make sure payments to vendors are applied properly, they can focus on keeping the business’s cash flow healthy. When vetting or setting up vendors, here are a few important questions to ask.
What Are Your Prices?
Departments are often given a budget to operate within throughout the year. While other departments may determine how that money is spent, they’ll turn to their internal financial experts in accounting for advice and guidance. Since businesses often spend a great deal of money with their suppliers, it’s important to negotiate the best discount possible on the front end.
What Reliability Guarantees Do You Offer?
Your vendor should put in writing that they’ll deliver their services or goods in a reliable manner. This document will serve as the supporting information you’ll need if for some reason the vendor should let you down repeatedly. You can’t run your business if you don’t have the supporting information you need, so it’s important from the start to make sure you’ve chosen a company that follows through on its promises.
What Are Your Policies on Late Payments?
While you may intend to pay the full amount due each period, occasionally such payments fall through the cracks. Ask a vendor to see its terms regarding late payments, whether the error is on your side or theirs. Will you be notified that your payment hasn’t been received or will they simply cut off service without warning?
What Is Your Invoicing Procedure?
As businesses have become increasingly automated, invoicing procedures have taken on new importance. Instead of doing business with a vendor that requires paper-based invoicing and payment, an accounting department may require the vendor to send an electronic invoice via email or accept ACH payments. When weighing one supplier against another, if all else is equal, a business may choose to work with a vendor that offers the most convenient invoicing and payment method.
What Customer Service Do You Offer?
If your employees have an issue with the services a vendor is providing, customer service becomes an issue. Ask questions about the options available, whether you send an email or make a phone call. Determine how support will be provided and if possible, ask the companies already working with them what support they’ve received. You may be able to get this information through online research if someone has reviewed them publicly.
Your vendors help provide the strong foundation your business needs to serve your own customers. By carefully screening each potential vendor, you can ensure you choose to work with providers that fit your own business’s needs. That will allow your team to form long lasting relationships with vendors that last many years.