Is it time to fire your vendor?

Companies are looking for any way they can to reduce costs. We know, the more things change, the more they stay the same.

But there’s no question 2024 is shaping up to be a major year for cost-cutting. CFOs and controllers are worried about a recession impacting their sales. Inflation and interest rates are higher than many struggling firms can handle.

One key move many are making is laying off staff. Cutting payroll is unfortunately putting a lot of folks out into a cooling job market.

Another option? Take a close look at vendors’ track records and rates too. Vendors of all shapes and sizes are hungry to capture new clients, and there may be a more attractive fit than the status quo.

Nearly 9 out of 10 companies outsource some function. Common examples include payroll, IT/cloud backup, housekeeping, building services and so on. But that doesn’t mean everyone’s getting their money’s worth.

Here are four common problems in vendor relationships that result in money spiraling down the drain:

1. What’s the financial goal?

The major goal for outsourcing in the first place is reducing costs. Yet only a third of organizations that outsource spell out their cost-savings goals to their contractors, according to surveys by ESI International.

Cost-savings initiatives should be clear on both sides. Vendors should know you’ll look elsewhere if they can’t offer a price that’s attractive, coupled with strong results.

2. Re-evaluate or fall behind

Many companies don’t evaluate how an outsourced project/job is matching up with the original goals. Even if you set out your goals from the start, it pays to check back throughout the process.

Some companies get used to minor problems and accept them as the norm. That lets contractors off the hook and costs you money.

3. Requirements were never made clear

In many cases, companies that outsource don’t make clear requirements of their contractors. Vendors perform better if their marching orders are put in writing.

When a contractor doesn’t have clear, written expectations, you can count on uneven results.

4. Not using new technology? It costs you

Vendors should be implementing new technologies and products to save time on the services they provide. Relying on older manual processes, particularly for payments, slows down operations.

And it shouldn’t be customers asking vendors about ways to implement tech solutions. It’s the vendor’s job to suggest newer products or services that will benefit their customers.