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What is supplier onboarding?

What is supplier onboarding?

Supplier onboarding, also known as vendor onboarding, is the process of finding potential vendors, evaluating them, utilizing compliance and risk evaluations, and incorporating them into a supply chain or other platform. 

The vendor onboarding process and supplier relationship management (SRM) are essential because they give businesses and other organizations a way to gather the information they need to evaluate, approve, and add new suppliers to their systems, as well as buy goods and services from, and make payments to, those same vendors.

Supplier onboarding — integrating new suppliers into a supply chain — necessitates a strategic blend of risk assessment, due diligence, and proficient business relationship management. 

What is the supplier onboarding process?

The supplier onboarding process is a series of steps taken to effectively integrate new suppliers into a business’s supply chain. It is structured to assess the suitability of suppliers, establish clear expectations, facilitate smooth collaboration, and ensure compliance with relevant regulations. 

While approaches to this process may vary across industries and companies, the supplier onboarding process typically includes the same essential steps, such as: 

  • Finding prospective suppliers 
  • Researching their business history
  • Getting the suppliers qualified
  • Negotiating and drawing up a contract
  • Exchanging necessary information
  • Training and integration
  • Monitoring performance
  • Continuous relationship management 

Organizations can establish efficient and mutually beneficial business relationships with their suppliers by following a well-defined supplier onboarding process, all of which contribute to a robust and resilient supply chain.

Benefits of supplier onboarding

By implementing an effective supplier onboarding process, organizations can retain the benefits of streamlined operations, improved risk management, strong relationships, and enhanced reputation, ultimately driving growth, profitability, and a competitive advantage in the marketplace.

Streamlines processes

Supplier onboarding leads to a more streamlined workflow, reducing manual effort and saving time. It eliminates redundancies, minimizes bloat in the supply chain, and improves your business’s overall efficiency.

Mitigates risks

Effective vendor assessment and supplier onboarding help improve risk mitigation efforts. By validating vendors, complying with industry and government regulations, and segmenting suppliers based on profitability and threats, organizations can mitigate risks and prevent problems down the line.

By implementing standardized processes, as well as automation and data management, supplier onboarding also reduces human errors, invoice fraud, and maverick spending. This leads to more accurate data entry, fraud protection, and a reduction in payment errors.

Enhances reputation

Organizations can enhance their brand reputation by effectively managing vendor performance and cultivating positive supplier relationships. A strong brand positively impacts customers, shareholders, as well as current and future employees.

Implementing supplier onboarding best practices establishes a reputation of holding to high standards and a commitment to healthy and positive business relationships. This reputation can attract reputable suppliers and enhance the organization's standing in the industry.

Improves ROI

Streamlining purchasing processes, aligning them with organizational goals, and leveraging vendor performance data can improve efficiency and profitability. By reducing redundancies, tracking costs, and clarifying expectations, organizations can achieve a healthier bottom line and optimize their ROI.

Optimizes payment systems

Supplier onboarding facilitates optimized payment systems by ensuring accurate, real-time invoicing, which helps reduce duplicates and automate repetitive tasks. This enables organizations to manage invoices more efficiently and get paid faster.

Builds stronger relationships 

A well-developed supplier onboarding process also enables the creation of a productive supplier relationship management program. This program establishes strong relationships with suppliers and provides a solid foundation for mutual success.

The supplier onboarding process fosters open, honest, and clear communication. Organizations can identify potential areas of miscommunication by evaluating a prospective supplier during the onboarding process and proactively addressing them. This minimizes confusion between the supplier and your business and reduces the risk of unmet expectations. It also helps establish a shared understanding and alignment of expectations between the organization and its suppliers.

Supplier onboarding practices — including training, ongoing communication, as well as consistent evaluation and approval processes — foster stronger and more collaborative relationships with suppliers. This prevents relationships from breaking down and causing disruptions in the supply chain.

How to create an effective vendor onboarding process

For most organizations, developing (and, in time, streamlining) a successful supplier onboarding process can be achieved in five easy steps:


Before diving into the vendor onboarding process, the first step is to define objectives by understanding the organization's needs and determining the resources required. 

This step also involves establishing clear goals, identifying key stakeholders, and allocating the necessary personnel and tools to ensure a smooth onboarding experience.

Create onboarding checklists and also establish efficient methods for collecting and verifying contact details and supplier information so that you can easily determine vendor suitability.

Set the standards

Establishing standards and criteria for selecting vendors is the next crucial step. Communicate clear expectations, business policies, and requirements to vendors during the onboarding process. 

Define the qualities, capabilities, and compliance requirements that align with an organization's values and objectives. Also, focus on effective risk assessment, vendor data management, and collaborative communication to enhance the efficiency of the onboarding process. 

This ensures a business onboards vendors who will meet its standards and contribute to its success. 

Connect and collaborate

The next step in effective vendor onboarding is building strong connections and fostering collaborative relationships. Develop clear lines of communication with vendors, including designated points of contact and channels for regular interaction. 

Approach each conversation with positivity, genuine interest, and a spirit of curiosity, turning the process into a rewarding networking opportunity.

Encourage vendors to make suggestions and ask questions, leveraging their qualifications and expertise to maximize the value of supplier experience in the onboarding process.

Emphasize clear and comprehensive communication throughout the onboarding process to avoid misunderstandings and ensure it is completed swiftly and accurately.

Save Time and Effort with Vendor Portals

Utilize a vendor portal or dedicated platform to streamline and automate various onboarding processes.

Vendor portals provide a centralized hub where prospective vendors can access information, complete required forms, submit documents, and track their progress. This also assists your business in key tasks, such as:

  • Streamlining data entry
  • Improving the speed and accuracy of data collection and evaluation
  • Reducing low-value data entry tasks

These are the ways that a vendor portal can help reduce administrative burdens, improve efficiency, and enhance transparency for all parties involved.

Create and Incorporate a Working Culture with Strategic Supplier Relationships

Finally, a business should encourage open communication, feedback exchange, and continuous improvement with its vendors. Schedule regular optimization sessions to review and improve the vendor onboarding process, ensuring it remains efficient and aligned with organizational goals.

Develop performance metrics and regularly evaluate vendor performance against agreed-upon key performance indicators (KPIs). This fosters a culture of accountability and strengthens the partnership over time.

By following these steps and incorporating the suggested tips, organizations can create a successful vendor onboarding process that aligns with their objectives, promotes clear communication, streamlines data collection, and optimizes supplier relationships. 

A well-structured and collaborative approach ensures a smooth onboarding experience and also sets the foundation for successful and long-lasting vendor relationships, which will then drive further operational efficiency and business growth.

Vendor onboarding checklist

When creating a supplier onboarding checklist, consider including the following items to ensure all details have been comprehensively covered:

  • Contact information: Collect all contact details of the vendor, including their business name, address, phone number, email, and primary point of contact.
  • Legal and compliance requirements: Ensure vendors provide necessary legal documentation, such as business licenses, certifications, permits, and insurance coverage.
  • Financial information: Request relevant financial information, such as tax identification numbers, banking details, payment terms, and any other information that helps facilitate smooth financial transactions.
  • Payment process: Gather information about the vendor's preferred payment methods, invoice submission process, and any additional requirements for accounts payable.
  • Products or services provided: Document the specific products or services the vendor offers, including details about quality standards, delivery schedules, and warranties.
  • Contractual agreements: If applicable, outline the terms and conditions of the vendor contract, including pricing, delivery terms, termination clauses, and any service level agreements (SLAs).
  • Training and support: Identify the vendor's training or support requirements to align with their organization's processes, systems, or unique needs.
  • Vendor evaluation and review: Establish a process for ongoing vendor evaluation, performance reviews, and periodic assessments to ensure continued alignment with business objectives.
  • Additional documentation: Include any additional documents or forms specific to an industry or organizational requirements, such as safety certifications, environmental compliance, or supplier diversity certifications.

Including these items in a vendor onboarding checklist ensures a comprehensive and standardized approach to onboarding new vendors, mitigating risks, and fostering productive relationships with suppliers.

How much does supplier onboarding cost?

The cost of vendor onboarding software depends on a business’s size and the number of current vendors. While it can range from $1,000 to $10,000 or more, the expense is justified considering the potential risks and costs associated with improperly onboarding suppliers. 

The onboarding process may involve expenses such as working with an agency on vendor compliance, hiring a manager, utilizing analytics or database software, and other related costs. 

Scaling and accommodating complex needs are crucial for future growth and maintaining good relationships with reliable and compliant suppliers.

How can you automate supplier onboarding?

Automating supplier onboarding processes using a self-serve vendor portal offers several benefits. This web-based interface simplifies the process for vendors and a business’s accounting team, providing easy access from anywhere. 

An enhanced supplier portal with dynamic web forms that connect to AP/AR software further streamlines onboarding, eliminating unnecessary steps and creating a seamless experience.

Supplier portals enable a more organized collection of necessary information and onboarding documents, including supplier payment process details. 

With process automation, supplier data entry is done once, updating the system automatically once completed. Guided self-service and automation also save time and money, allowing staff to focus on higher-value tasks.

To ensure comprehensive coverage, develop a vendor onboarding checklist or questionnaire that addresses all relevant business processes. 

When seeking vendor onboarding software, prioritize three key considerations: easy integration with existing internal platforms, a self-service supplier portal for vendors, and robust security measures to safeguard against cyber threats and data breaches

Get suppliers and vendors paid on time with BILL

Supplier and vendor relationships are crucial to business success, and a large part of a successful supplier onboarding and procurement process is getting finances set up and paid in a timely manner. 

With BILL’s AP automation software, vendors can email a digital invoice, or you can upload an invoice directly to your dedicated AP address, and the platform will begin processing it automatically upon arrival. It's that easy!

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