Because at the end of the day it’s how profitable you run your business that truly makes the difference. Those individuals which understand that both top line revenue and bottom line profits are equally important in every business, truly separates great leaders from mediocre ones when it comes to running a profit driven organization.

Cost reduction is important in business because it directly impacts the bottom line at no cost to an organization. (Unlike sales, which has direct material, labor, facilities, marketing, commissions, management, and administrative costs). By reducing costs, a company can increase its profitability and improve its financial health. This is especially important in times of economic uncertainty or when facing increased competition. 

Additionally, cost reduction can help a company become more efficient and agile, allowing it to respond more quickly to changes in the market. While top line revenue is important for growth, it is not sustainable if costs are not managed effectively. To draw an analogy, simply put “why would you place water into a leaky bucket?”

Therefore, a true balance between revenue growth and cost reduction is necessary for increase valuation and long-term success. 

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Why are we trying to do everything in-house, and when do we start looking outside to experts who are better suited to improve our bottom line.

Here are some key considerations your company should be looking for as you determine if an outsourced managed service solution will create value for your company:

Does outsourcing align with our internal resource needs?

As you evaluate your internal staffing, resource roadmap, and internal processes, does a managed services solution allow you to unburden your staff so they can handle other business-critical activities?   Will a fully managed solution deliver the improvements better than we can internally?

Are their experts better than ours?

You need to ensure the VMS provider is designed and resourced by a team of subject matter experts that are focused on cost reduction and have the appropriate industry expertise to provide you with the required improvements to your organization.

Is our process proven to provide results?

Do you have a cost reduction strategy?  A proven process that begins with assessing the current state of your vendor agreements and contracts, resulting in demonstrated savings should be a prerequisite.  

Scalable and Reliable Service Level Performance

Can the provider meet your unexpected demands (higher number of new vendor diligence than you anticipated) and align with your growth plans to scale with your accordingly?

Are You Ready for Outsourcing?

If you are unclear if outsourcing makes sense for you, consider the following as objectives that outsourcing some or all of your Vendor Management Program is something you should be considering:

• Lowering Costs
• Streamlining Operations
• Implementing Best Practices 

In the end, outsourcing your Vendor Management function can make sense on many fronts.  It can send a message to your staff, executives, board members, and investors that your take seriously the responsibilities to mitigate third-party risk, optimize your operating costs, ensure regulatory compliance and strive for excellence.

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The vendor selection process is a critical step that happens early in the vendor relationship. By being diligent during vendor onboarding, you will prevent a lot of problems down the road. Every potential vendor should be subject to a vetting process that will assist with the selection of the best partner for an organization. Let us review what the process entails.

9 Steps to Onboard a New Vendor

At a minimum, your onboarding process should consist of the nine steps listed below. The process should be more rigorous for vendors with a higher level of criticality. Let’s examine the process further:

1. Do your Research 

Make sure you’re aware of all the vendor options available to you by researching online, listening to sales pitches and asking business counterparts for recommendations.

2. Issue a Request for Proposal (RFP)

This document should be referenceable by both your organization and any potential vendor to clarify exactly what product or service is being quoted. It is recommended to send out an RFP to the top 3-5 vendors you have identified. Within the RFP, outline your organization’s business objectives and technical requirements. Make what you want to accomplish clear to the vendors, and request that they formally respond to every point in the RFP with a confirmation stating that they can meet each requirement.

3. Compare Proposals

It is a good idea to list out the features and functions that have been included in the RFP. You will be better prepared to draft a pros and cons list of each vendor if you create a comparison tool, including details such as where each vendor excels or any critical requirements that may be lacking.

4. Complete a Vendor Risk Assessment 

This crucial step will determine if the vendor is high, moderate or low risk to your organization, as well as whether they’re critical or non-critical. The results of this assessment will factor into the due diligence you will collect.

5. Collect Due Diligence

Do your homework. The due diligence requirements are going to vary depending on the criticality and risk level of the vendor. The more critical or risky the vendor, the more detailed your process should be. The list below provides you a set of guidelines that should ALWAYS be followed:

• Mutual Non-Disclosure Agreement (MNDA) or Confidentiality Agreement
• Basic Information (i.e., full legal name, address, all physical locations, Website URL)
• Ownership structure and affiliated companies
• Tax ID
• State of Incorporation
• Articles of Incorporation
• Secretary of State Check
• Business License
• Certificate of Good Standing
• Credit Report
• OFAC/PEP Checks
• Any “doing business as” or “also/previously known as”
• Dun & Bradstreet (D&B) Report
• Research online complaints and customer reviews
• Vendor negative news search findings
• List of subcontractors
• Picture or Google map view of the facility (if required)
• Check the CFPB Complaint Database and/or Better Business Bureau rating

6. Obtain References

After narrowing down your list of preferred vendors, ask them for professional references or case study/customer success story documentation. It is always a best practice to learn about the customer’s firsthand experience by speaking to someone or reading more about the product/service.

7. Develop an Exit Strategy 

Now that you have compared vendors and completed your due diligence, it is time to sign the contract. 

One important thing many people overlook is an exit strategy. You need to consider a backup plan if the vendor relationship strays off course. This should be done before you ever sign the contract. You never know what may happen in the future, and a second source may be the best solution, even if it means sharing the volume between 2 vendors.

In the event you need to move on from a particular vendor, you’ll want to know some important things:

• How will your data be returned to you or destroyed?
• How quickly you can replace the vendor or bring the product/service in-house?
• Who is your backup vendor?

8. Keep Senior Management and the Board Informed 

Throughout the entire onboarding process keep senior management and the board updated. Be sure to present them with a summary of the due diligence, risk assessment, your planned ongoing monitoring and the proposed contract prior to signing on the dotted line.

9. Perform External Vendor Audits

While your staff is incredibly talented, there are certain competitive and cross-industry-related benchmark analytics and analysis tools that most do not possess internally. Because these capabilities are missing you should seek external expertise to review, analyze, recover and optimize spending and contractual terms related to your vendors. This exercise alone can save 10’s, 100’s even millions of dollars if enough spend categories are looked at on a monthly or at minimum* annual basis. (*NOTE: Often times contractual clauses restrict you from going past 90 or 180 days for recoveries on misappropriated billings. These too must be looked at and corrected when found, if they are determined to be a contractual risk element. Best to seek external expertise to assist in this process.)

These 9 steps will save you from contracting with the wrong provider. Doing your due diligence right away helps guarantee that you are selecting the best vendor in the space and the best fit for your organization.

Limitless Technology, LLC has been managing complex indirect spend and vendor documentation since 2006 for some of the largest companies in the USA saving them millions in costs.

Through our Billing Optimization and Vendor Management Solutions proprietary platforms, we utilize technology, processes, expertise, time, and resources to improve our client’s bottom line.

Limitless Technology manages your vendors, so you can manage and grow your business.

For Additional Information Contact us at 407.330.4466

Opportunity Cost

Often, organizations choose the path of least resistance. Contract renewals are no exception, especially when a previous contract/agreement with an auto-renewal clause has already been approved by leadership. In fairness, leaders and managers don’t have the time or resources to research each vendor agreement and vet for better opportunities with a new vendor partner. However, each time an auto-renewed contract is set into action losses can occur. A better solution would be outsourcing this process to a trusted vendor management consultant who can personally manage and negotiate each contract to make sure your organization is receiving the best and most cost-effective vendor solution.

Penalty Costs

Many organizations have compliance measures that surround their agreements. Not verifying these vendors meet those compliances can lead to higher costs or worse yet severe legal repercussions to the organization. Additionally, mismanaging the terms of vendors’ contracts can lead to additional penalties for the organization. VMS consultants can focus on compliances making sure your agreements comply with all state, local, and federal regulations.

Future Savings/Costs

Often, when a vendor is pursuing an agreement with a new client, they focus on cost-saving measures which can reduce a company’s overall bottom-line. This is an attractive pitch to organizations, which are always looking for new ways to be more efficient and cost-effective. However, a company’s internal teams are usually not fully briefed on their part of the process. Additionally, these internal teams are usually not fully trained in the steps of managing the new agreement process. When internal teams don’t effectively manage the new cost-saving measures in agreements, Company’s end up losing big potential savings.

Managing the contract is also important when significant costs are associated with delaying outlined timelines. Making sure vendors stay accountable for the timelines agreed upon could save large cost implications for the organization. Conversely, an outsourced vendor management team can cost-saving solutions are implemented and are continually monitored to guarantee promised results.

Redundancy Costs

When contracts are not managed effectively, significant redundant charges can be missed in annual reviews. Double charges and billing discrepancies are often missed when resources are not continually monitoring to audit vendor agreements. A VMS consultant can take a breadth of billing statements and thoroughly review inconsistencies to reduce redundant costs. In addition, they will monitor future billing to ensure similar redundancies don’t emerge months later.

These costs are something every company experiences but are completely avoidable. All that is needed is expertise in the auditing and management of your business’s current agreements. Limitless-CRS has a proven vendor management solution that eliminates these costs and returns that revenue to your organization. Click here to reach an explanation of our VMS process to understand how these costs can be reduced.

Limitless Technology, LLC has been managing complex indirect spend and vendor documentation since 2006 for some of the largest companies in the USA saving them millions in costs.

Through our Billing Optimization and Vendor Management Solutions proprietary platforms, we utilize technology, processes, expertise, time, and resources to improve our client’s bottom line.

Limitless Technology manages your vendors, so you can manage and grow your business.

For Additional Information Contact us at 407.330.4466

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About Limitless Technology

Limitless Technology, LLC has been managing complex indirect spend and vendor documentation since 2006 for some of the largest companies in the USA saving them millions in costs.

Through our Billing Optimization and Vendor Management Solutions proprietary platforms, we utilize technology, processes, expertise, time, and resources to improve our client’s bottom line.

Limitless Technology manages your vendors, so you can manage and grow your business.

For Additional Information Contact us at:Phone:            407.330.4466

The biggest risk is not knowing how the pandemic has affected your vendors’ business.  Like you, they are working hard to manage their way through these difficult times. They are under increasing pressure to manage capacity and optimize efficiency. Whether ramping back up too quickly with limited personnel or resources, or pushing hard to meet rising volume demand, it’s easy to make mistakes, even if they are made without any fraudulent intent.   Any compromises made in operational execution could be detrimental to the supplier’s reputation and survival, and the resilience of the clients they serve.

It is easy to see an increased risk to your business if a supplier is forcing employees to work longer hours and meet volume demands.  You could have a small or mid-sized supplier that unintentionally introduces employees to health and safety risks associated with COVID-19 because they don’t have the necessary resources to procure personal protective equipment.  With no audits to implement due diligence, how will you know if your vendors are cutting corners or even at the risk of going out of business? A virtual assessment that delivers actionable data is an effective means of gaining visibility in every industry market, and a smart alternative to on-site audits during this pandemic. They allow for vendor management teams to gain deeper visibility into their vendor performance without having to meet in person. Developing a remote vendor auditing approach based on a powerful process will also aid post-pandemic recovery. By understanding which suppliers are performing well and which are at risk, procurement teams can continue to make better decisions, as well as prioritize the suppliers and vendors that require on-site audits when the economy comes back online.

To learn more about Benchmark Analytics check out this block post.

What is Cost Avoidance?
Cost avoidance focuses on actions that avoid incurring costs in the future. This means taking measures to lower a potential increase in expenses that a company might likely incur costs in the future.  For example, spending money regularly to properly adhere to maintenance schedules on production equipment is a cost avoidance strategy. Failure to address maintenance and keeping everything in good working order could lead to needing to make more expensive repairs or replacements in the future. Letting employees operate equipment in poor conditions could also increase the chance of an accident which would go far behind the cost of simply repairing it at that time.

Cost Savings
Unlike cost avoidance, cost savings are reflected in both the company budget and financial statements. Cost savings can also be referred to as “hard savings”, and associated with actions that reduce debt levels, current spending, or investment. An organization’s financial statements should always highlight any savings achieved through cost reduction activities.

Planned cost savings should be part of the budget process, as well. Cost savings in comparison to previous periods should be added to financial statements, so the company effectively measures cost savings concerning profit over the year.

Where should you focus?
When developing a cost reduction strategy, make sure you understand the difference between cost savings and cost avoidance.  Review your cost avoidance projects very closely because the financial benefits are not easily verifiable. The impact of these projects can only be estimated, assuming what would happen if you do not implement the proposed plan of action.  On the other hand, projects that demonstrate clear and observable cost savings show bottom-line benefits.  These contributions are reflected in measurable financial results over time.

For Additional Information Contact us at 407.330.4466