Running a business is much like raising a child; it takes a village. In the business world, however, the village consists of vendors and outsourced professionals. Without these resources, your business can turn into a one man show/torture device and quickly burn you and your business out. Hiring vendors to provide goods to supplement your services or to outsource projects/work in order to maximize time can widen your profit margin. Yes, outsourcing can be great. But don’t forget that it also means verifying whether your vendors deliver or perform as promised.
The importance of staying in touch, and on top of your vendors is paramount. As the saying goes, “when the cats away, the mice will play”. Keep a close communication with your vendors to not only make sure you’re on the same page, but that you are also on track. As in any type of business, when the person you are working with feels as though you don’t care; they stop caring too.
A passive approach to your vendors could waste your time and money, and damage your reputation. Monitoring your vendor’s performance can be simple and cost-effective if you keep these priorities in mind:
Define Performance Measures Up-Front
Avoid surprises and misunderstandings by documenting your performance expectations in a vendor agreement or contract. The agreement should address performance measures that drive the essential success factors for your business, such as timeframes, quantity, quality specifications, and delivery terms. Documenting expectations helps you think through what you need and helps you to hold the vendor accountable.
“Trust but verify” should be your mantra for determining that your performance expectations are met. For goods that you purchase, verify that you received, in usable condition, the quantity that was ordered and invoiced. Verify that services were provided: “Was the class taught?” “Was the grant written?” “Was the landscaping manicured?” Find a simple way to make sure you get what you are getting billed.
Spot Check Price and Quantity
Billing errors happen, often unintentionally. You could pay too much if you don’t find them and bring them to the vendor’s attention. Bills from new vendors should be reviewed in detail to endure that contract terms are accurately reflected and to let the vendor know you are checking. Periodically review bills from vendors you’ve used for a while, just to be sure they are accurate.
Monitoring systems and checklists don’t replace knowing your vendors and communicating regularly. Establishing a relationship is important, especially for key vendors. If something changes or doesn’t seem “right”, be sure to ask why and follow-up if the answer doesn’t really explain what you have observed. Has the relationship changed? Have you stopped getting reports you used to? Don’t ignore any red flags. It could cost you money and risk your reputation.
Outsourcing can help your business grow or reach new markets. Overseeing vendor performance will help you get the goods and services you need and minimize costly and aggravating surprises.