Finding top notch vendors can help your business in a multitude of ways. There are some vendor onboarding best practices that can help make the process run smoothly. If you do not currently enforce any practices during the vendor onboarding period, we have put together a list that could improve your systems, create efficiencies and help decrease the amount of time you are spending at the end of the year in preparation for 1099s.
Do your research.
This step starts at square one before you make a decision regarding which vendor you will choose. Request quotes and contracts from all vendors before they begin work for you. Typically, at least three quotes should be obtained to ensure you know the standard rate in the market. Review their portfolio of work, ask for references, and look at their reviews online. This will help you weed out potentially incompatible vendors.
Get a contract.
A contract will ensure you know the parameters of the work they will perform and set up expectations before any work has begun. It is important to have the details and scope of work to be performed outlined in the contract so you are covered legally if some aspect of the work is not completed. If you are hiring independent contractors, this step is crucial so there is no ambiguity about the terms of your relationship.
Get a completed W-9 Form before you begin work with any vendors.
When you pay $600 or more over the course of a tax year, it is required to report these payments to the IRS on a return called a 1099-MISC. You will need the information from the W-9 to complete the 1099-MISC. It is important to note that this form contains the tax ID or Social Security number of the contractor completing the form so both parties must guard the form carefully to protect against identity theft. The best way to ensure you get a completed W-9 form from your vendors is to require a completed form before you will make your first payment. Find a blank W-9 you may share with your vendors here.
Obtain their bank information for online payments or use a virtual payment solution that does this for you, reducing risks of misuse of information.
By gaining this information, you can utilize virtual payment solutions, which will ultimately save you time and money. One of our favorite tools is Bill.com (link to our Resources page). This program integrates directly with your accounting software and makes the Accounts Payable process run smoothly and efficiently. Additionally, there is no need for your vendors to provide access to their financial information, making the process more secure and providing them extra comfort in the electronic payment process.
Store all of the information and forms securely.
In order to protect yourself and your vendors, you must keep all of this information in a secure place. As a virtual CPA firm, we utilize GoFileRoom as our document storage software. It keeps an accurate record of who has accessed files and is a secure storage solution developed for professional services. Some other programs that may be utilized, without the high price tag, are Dropbox and Google Drive, but keep in mind these do not have the high-level security that paid programs offer. If you choose Bill.com to help manage your Accounts Payable process, this program also has the capacity to store information.
Ensure they understand your payment cycle.
Your vendors and contractors need to know what date you cut payments so expectations are met on both sides. If communication is not clear, this could lead to frustration both from your vendors and yourself and can potentially lead to cash flow problems.
Incorporating some or all of these best practices into your onboarding routine can save you some time and heartache while doing business. There are a large number of vendors available but not all are created equal. By putting the necessary work into the beginning stages of a vendor exchange, you can lay a great foundation for a successful professional relationship and reduce frustration from everyone involved. Begin by implementing one or two steps from this process if you do not currently have anything in place and work your way up to a full onboarding procedure.
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