One of the big reasons that you should consider implementing AP best practices like the use of automation, as well as automation throughout other areas of your business, is so that you have increased visibility.
When you have increased visibility through the implementation of automation and business software, and analytics, you’re empowered to make smarter, data-driven business decisions.
Once you have in place the tools for visibility and the gathering of data, you can put it into action. A good place to start for a new year is with a supplier audit.
When you don’t regularly audit your suppliers, you run the risk of wasting significant amounts of money. It could even lead to financial loss because of damage to your reputation due to working with a supplier you should have cut ties with.
When your supply chain is disrupted in any way, the ripple effects can be staggering.
What Are the Benefits of Auditing Your Suppliers?
When you commit to regularly auditing suppliers, one of the biggest benefits is the potential to save money. You can track the performance of your suppliers compared to your agreements with them and identify ongoing problems. You can also potentially spot problems before they happen.
Auditing suppliers will let you make sure everyone you’re working with is adhering to your standards, and you’re making sure that you’re delivering continuous quality improvements.
Relationships with suppliers are partnerships, and strong partnerships are based on mutual accountability and the identification of new opportunities to strengthen the relationships, which can be achieved through audits.
Audits of your suppliers can also ensure all of your processes are optimized.
Starting An Audit
When you’re beginning a supplier audit, you want to gather all the documentation and information exchanged. This is much easier when you have software and automation in place. You want to look at contracts, delivery specs, complaints, and anything else relevant to the relationship.
Then, you should create a checklist or guide so that you can standardize the audit process based on your goals and objectives.
Everything leading up to the actual audit can be known as pre-audit research.
As you’re doing pre-audit research, you’re going to then start to develop organizational quality standards.
This is important because any time you’re performing an audit in the future, you can rely on this standardized process you set up initially.
Before you start the actual audit, you want to have defined goals in place. For example, maybe your goal is to improve communication with your supplier. When there’s visibility into your supplier’s activities, it can help facilitate better and more transparent communication.
When you have a regularly scheduled audit, then you are also paving the way for better communication because you’re ensuring the maintenance of a mutually beneficial relationship.
Along with better communication and a strengthened relationship, another potential goal of supplier audits might be improvements in customer satisfaction. Your reputation is significantly impacted by your suppliers, and you want to make sure you’re holding suppliers accountable as such.
Is your vendor outsourcing? This is something you need to find out during an audit as well.
Do Online Research
You want to audit your suppliers based on your own standards, but you also want to regularly check with your suppliers online and make sure their reputations are in-tact, and they aren’t facing any outside issues that could potentially be problematic for your business.
Verify Insurance Coverage
You want to make sure your vendors and suppliers have up-to-date and sufficient insurance coverage. You can obtain their certificate of insurance and check policy limits and the type of coverage.
This can be especially important when you’re doing audits of cloud vendors because you want to minimize your risk exposure.
Use Audit Findings As a Basis for Renegotiations
Too often, businesses make the mistake of being on a “set it and forget it” path with their suppliers, meaning that once the initial relationship is established, there are never renegotiations. You should regularly renegotiate with your vendors to make sure you’re getting the best possible deals and cost savings for your business.
You should be aware of your contract terms, and you should constantly be looking for opportunities to get discounts.
During audits, make sure you’re tracking the expiration dates of your contracts so you have the time to renegotiate based on your audits, or if necessary, find new suppliers.
You’ll have a much better idea of how to improve your business when you have the data on-hand that comes from your audits.