Top tips for vetting new suppliers & vendors
It’s important to choose reliable vendors and contractors who deliver quality work. The vetting process is imperative to effectively managing risk and ensuring quality service delivery. Vetting potential vendors offers you insight into their past performance, potential legal or financial issues, and insurance compliance.
By following these tips, you can be assured that your vendor vetting process is thorough:
- Request & review the vendor’s W-9
You should start with the vendor submitting a W-9. Verification of the company name and IRS registration helps establish legitimacy.
- Verify state & local licensing
Do your homework to determine what kind of licenses may be required in your location. Then, ask for the appropriate license information from your vendor. Business licenses are public record making it easy to confirm that the license is valid and current.
- Request a Certificate of Insurance
Always require that a current Certificate of Insurance (COI) is submitted, verified, and stored prior to onboarding any vendor in order to protect your organization in the event of an incident.
- Check for safety & quality
Verify that the vendor consistently meets and follows safety guidelines and best practices. Performing an OSHA Citation and Violation search in advance will allow you to view all known citations and violations.
- Review the vendor’s financial history
Confirm that your vendor is financially healthy and can fulfill the required work. To gain a better view of the vendor’s financial history, you should look into the following three areas:
- Judgements: Review for any active or past litigation cases. A history of the company’s proceedings can provide valuable insight into their ability to do (or not do) the job.
- Liens: If there are any active liens it is important to understand the type of loan and the potential impact on the vendor’s ability to complete the work.
- Bankruptcy: Any pending or past filings warrant additional conversations about the vendor’s financial stability.
The Bottom Line
Entering into a contractual relationship with a vendor without proper vetting can have significant ramifications. Even existing vendors may have changes to the health of their company or have licensing/certification issues that may also present potential issues. The vetting process is a critical process in safeguarding your business.