When you start out managing vendor relationships, start out with a few principles. First, get everything in writing. Anything that needs to be paid, has to have an invoice—get it in writing. You also want in writing all deliverables included in vendor services. This creates paper trails for all your accounting work. Also, with regard to communication, ask them to work within your existing communication system and tools for emails, calling, and tracking. This helps to simplify your life!
Digital tools for managing vendor relationships
Speaking of tools, Asana is the top tool for managing vendor relationships in my opinion. Of all the management tasks I do, Asana is the best for tracking work orders, which is commonplace when working with vendors. Basically, you create a task in Asana, assign the task to someone (even if they don’t have a subscription to Asana), and Asana assigns the assignee all the details—time, tasks, and messaging—for that task. This means that you can keep all your communications with vendors in one place, and Asana sends out the messages! When the vendor replies to the email, Asana even puts their response into your task. This is absolutely vital for efficiency, and it’s very low cost.
(As you grow, consider Buildertrend or AppFolio to coordinate your work orders, because they’re higher budget softwares.)
For example, I could assign Red Cat Plumbing to do a bid on a certain home, they reply back with a bid price, and we give them approval. All those communications and authorizations go through our software. This makes it’s easy to track and assign work orders to different people. That way you can run your business without pulling your hair out!
Advice for managing vendor relationships:
1. Avoid paying up front. Some advice I would offer is this: avoid paying up front at all costs. This is important because you lose leverage if the job is not done right. If it’s not done right, you have no leverage, no recourse. If you must, though, pay for materials. In this case, make sure you have everything spelled out up front.
2. Consider vendor insurance. If vendors are going on site—depending on your specific industry—make sure they’re insured. If one of roofers for Joe Blow, the roofer, falls off the roof, you’ll want to make sure that his insurance is up to date, that you have a copy of it, and that you’re a named insured. That way, you cover yourself. All they have to do is call their insurance and add you to their list. Get this in writing, because if you’re not careful, it could come back to bite you.
3. Include milestones. Make sure vendor job is spelled out in milestones so you can track and approve payments for invoices accordingly. This helps ensure that they do the work before you pay them.
4. Get feedback. Another critical piece of advice is ask residents for a survey on the vendor’s performance. Although we don’t do this every time, we seek to do this on every vendor’s service. For example, after a vendor completes a lawn service, ask vendors, “Did they complete the job as promised?” “Where they pleasant to work with?”