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Supplier onboarding best practices

By Annapoorna

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Updated on: Oct 23rd, 2023

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4 min read

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Suppliers play a vital role in the product life cycle. They provide raw materials for production. Thus, every company must build strong relationships with its suppliers to create the best products. This article discusses the importance of supplier onboarding and the best practices for the supplier onboarding process.

Importance of supplier onboarding

Supplier onboarding is the process of collecting information required to select a vendor/supplier, evaluating the information, and integrating the selected supplier with the supply chain platform. The process also involves vetting and validating the supplier to ensure that they are compliant with the enterprise's rules and regulations. The main purpose behind this process is to enable the enterprise to purchase goods/ services, conduct business, and make payments to the suppliers systematically. 

Additionally, the supplier onboarding process is a base for effective supplier management, risk management, strategic sourcing, procurement and supplier compliance management. Especially with the latest input tax credit rules under GST, businesses now have an increased dependence on suppliers to upload their invoices on time, thereby heighening the need to work with compliant suppliers only

It is essential to keep in mind that not only large suppliers require attention. If all the suppliers don’t participate, it becomes difficult for an organisation to increase efficiency and achieve a higher return on investment. It helps create a streamlined process to build strong supplier and buyer relationships, which ultimately results in improved business outcomes for both parties.

Best practices for supplier onboarding

Here is a list of best practices while creating a supplier onboarding plan:

  1. Create an evaluation process: The first thing is to create a supplier onboarding checklist based on what your organisation is looking for in terms of performance, pricing and reliability. Also, ensure that you verify the contact information and other detailed supplier information such as the supplier’s past performance, compliance history, and reputation in the market to decide whether to onboard the supplier.
  2. Create vendor portals: Create a vendor portal to provide the prospective suppliers with self-service access for registration and onboarding evaluation. This helps the new vendors to familiarise themselves with your system, requirements and parameters. It also saves the time of your team from data entry work. Thereby, reducing the average time required for onboarding a new supplier. 
  3. Clarify your expectations: Set clear expectations to ensure good working relations with the suppliers. Transparency in expectations helps to build successful supplier relationships. When onboarding new suppliers, make them understand the expectations with regards to product quality, lead time, pricing and payment. Also, make the onboarding programme guidelines easily accessible to all the suppliers.
  4. Automate tedious processes: Automation helps continuously improve business process management. Automation helps create a compliant and efficient process for onboarding new suppliers. This also saves human time spent on tedious tasks. The employees can thus spend more time planning strategic roles. By automating the vendor onboarding process with a good AP automation software, both pre and post vendor onboarding checks can be carried out to ensure that the enterprise only onboards and deals with compliant vendors.
  5. Create accountability: Setting responsibilities to manage different tasks helps to improve productivity. There are multiple steps involved in the supplier onboarding process. Creating a point of contact for each step helps streamline the process and create accountability.
  6. Identify and prioritise strategic suppliers: Certain suppliers have a huge impact on your company’s performance through superior performance or access to certain raw materials at exceptional prices. If such a vendor is identified during the initial onboarding process, a separate process can be followed for bringing such a strategic supplier on board. 
  7. Undertake continuous compliance checks: While carrying out a pre-onboarding evaluation of a supplier is important, given the recent changes under the GST law, it is critical to regularly undertake post-onboarding supplier compliance checks. This includes checking to see whether the supplier is filing their GST returns and making tax payments on time. If a supplier default, the recipient business loses out on input tax credit, thereby increasing their cash flows and impacting working capital. Hence, continuous post-onboarding supplier checks are a must. 

Lastly, setting efficient communication lines between the supplier and the procurement team helps create a hassle-free onboarding process and provides for quick resolutions of any hiccups that may arise along the account payable process.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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