Making a list and checking it twice is one of Santa’s best known practices. It’s worth emulating when trying to manage a lot of information. Like your list of vendor partners.
The average dealership has around ten vendor partners. Large groups can have hundreds. Whatever the length of your list, proper management helps you weed out the naughty (costing you money) from the nice (making you money).
Vendor management is not a new topic; but it’s arguably more important than ever now with margins continuing to shrink and our industry rebuilding from the pandemic hit. A hard look at your vendors can save money by cutting under-performers, weeding-out duplicates, and consolidating services under better contract terms.
Now’s the time to prioritize vendor management and make 2021 a year to rebuild and rely on those you trust. Get started with these proactive tips:
Audit your current vendors. Prior to budgeting, create a list of all the existing vendors that work with your dealership. Pull a report from your check register or run a DMS vendor report. This list helps you understand what you’re paying for, and gives you a starting point to determine what’s working and what’s not. Look for extraneous vendors and duplicate services. Are you paying for a service that comes free from one of your OEMs? Are you paying two companies for the same marketing services? Dig deep and weed out what you don’t need.
Commit to a 6-month audit period. Take a hard look at your vendor costs twice a year. It’s surprising what can happen over just six months. Prices can go up without your knowledge. A product or service that seemed like a great idea may be doing nothing to increase sales or reduce costs. A regular audit period allows you to cut your losses before they really hurt your bottom-line.
Discuss new products and services. Tell your team what you want to bring on board before signing a contract. A department may already be using a proven vendor for the same product or service. A multi-point store may discover one franchise already tried a vendor and the relationship failed.
Designate authorized signers. Authorize only one or two staff members to sign contracts and expense the product or service. This is especially important if you have multiple stores. As a former Controller, I can tell you it was extremely frustrating to uncover an auto-renewal for a contract I knew nothing about and that we were stuck with for another year.
Create one email box for vendors. All vendor-related email notifications should go through one shared email box. I liken this to physical mail. You have one physical address where the mail goes. The same should happen with email. Designate one or two people with monitoring that email box so you never miss vendor communications.
Store all agreements in one central location. Ease vendor auditing and make it simple to find and review contracts by storing them all in one central location. You can designate a filing cabinet for this, but digging through paper contracts takes time and ups the likelihood of missing a renewal or vendor duplication. Online storage is the best option. A third-party document management platform allows you to retrieve and view contracts with only a few keystrokes, create spending reports, and stay on top of auto-renewals. You also get corporate transparency into all stores to better consolidate vendors and build the case for bulk pricing.
Santa may be for kids; but the practice of making a list and checking it often is a great tip for vendor management and all kinds of business decisions. Make 2021 a year to rebuild with a plan for regular vendor check-ins to ensure every expense is necessary to your business and adding to your bottom-line.