Vendor management extends beyond simply finding and engaging the services of a skilled service provider.This is because vendors working on your property would typically be authorized by you, and as such, you want to ensure that only the right set of people get access.Protecting your property and tenants is paramount, and this is precisely why vendor management is such a key aspect of managing property.
This article covers vital areas of this theme and guides you through the entire concept of vendor management.
Why is Vendor Management Important?
In addition to the base reasons that have been highlighted above, vendor management plays an essential role in selecting the right vendor for a specific need.
Proper management also impacts real estate finance since exploring opportunities to save costs and achieve development goals may lie in the hands of chosen vendors.
Effective management is also essential to ensure top-of-the-line service delivery alongside preventing service disruption.
Sufficiently excellent management could lead to the development of a quality relationship between landlords and property managers on one spectrum and vendors on the other. This could provide sufficient leverage to request discounted rates.
How To Screen Vendors
Screening of vendors is a prerequisite to achieving great vendor management. From the screening process, stakeholders in the real estate business can ascertain which of the vendors, best works for them.
While screening vendors, here are some key criteria to be considered:
This is concerned with the proximity of the vendor to your rental properties. Do they communicate effectively and timely?
Are they open to providing emergency services as well as round-the-clock availability? These questions should be asked during the screening.
Both business and individual professional licenses of potential vendors should be up to date. Unlicensed vendors should be disqualified right away.
Also, if local statutes make it a requirement, you should be in the know concerning the status of the city, state, or county license.
Damages and incidents may occur during the process of vendors operating. Ascertaining whether the vendor has insurance to cover potential injury, damage, or liability claims should be done and tracked the insurance limits and expiry dates.
Work experience comes in very handy, especially hands-on services-on. How many years has the vendor spent in that line of work? Are there reviews or testimonials that attest to excellent service and interpersonal skills? Ensure to note all of these.
Taking an interest in how vendors screen employees or contractors that would be visiting your property is essential.
This is because the property manager or landlord can be potentially held responsible for hiring a vendor who sends along an individual that causes injury to a tenant, themselves, or the property. Covering these bases is therefore essential.
Typically, vendors should provide this sort of information if requested. If a vendor sees a problem with this, consider such action a red flag. In addition, you should take steps to verify the information provided as well.
Using vendor screening services can give you a window into the backgrounds of individual employees of these vendors and vendors themselves too. Factors like criminal and financial background can be accessed.
Vendor Management Process
After identifying criteria to note while screening vendors, detailing the actual process is the next key stage:
This usually calls for a measure of sourcing and researching suitable service providers. This step also involves submitting requests for proposals (RFPs), and requests for quotation (RFQs). Vendors are then shortlisted and eventually selected.
For the most part, price ranks as a key factor in the process, however, some other major factors include the vendor’s track record and capacity, communication, ability, availability and reputation.
Negotiating the terms of the contract at the onset of the arrangement is necessary for a smooth flow all through. This process might take time and typically concludes on two major aspects:
- Start and end date of the arrangement
- Outline of goods and services to be offered
- Terms and conditions guiding the arrangement
If confidentiality is required, it is common to see a Non-Disclosure Agreement (NDA) signed.
This comprises providing the vendor with all necessary information and documentation they require to begin work. Vendor onboarding also covers the following aspects:
- Provision of vital payment and contact information
- Review of licenses that the vendor holds
- Provision of insurance details and tax forms
Some of this information is needed for proper real estate bookkeeping.
Monitoring Vendor Performance
Once the vendor begins work, a vital part of the management process is evaluating the performance of vendors.
Certain key performance indicators (KPIs) may be used to monitor this, such as timeliness and quality of service delivered.
Monitoring and Managing Risk
Preventing messy situations that could affect your business is important. Looking out for risks such as lack of compliance with local statutes, lawsuits, as well as property damage is essential.
In addition, there is a possibility that non-provision of certain goods/services may negatively impact tenants or property. All of these risks would need to be closely monitored.
If your vendors are holding up their end of the deal, then you are mandated to fulfill yours as well. Making prompt payments can be handled by your real estate accountant in line with existing agreements.
Policies in Vendor Management
Of the various policies that may be linked to vendor management, rental business policies take the top spot here. Policies and rules are typically created during the screening process and presented to vendors to guide their mode of operation.
Complying with your policies, procedures, and expectations would usually be a vital point during negotiations and are necessary because of the parties involved; your tenants and the property.
As a tip, getting these policies in writing serves to indicate efforts made to cover all bases if an issue arises. The vendor and landlord/property manager should mutually agree to the following:
- How contact would be made if the services of the vendor are required
- The typical time frame for services to be rendered; assessing the problem, delivering an estimate cost, getting work done and approved
- Documentation to prove authenticity to management and tenants, invoices, photographs of work done
- An alternative if work cannot be done
- Cost escalations and over runs
- Your anti-discrimination policy
Once these policies are in place, collaboration would become a much smoother process. In addition, your tenants can stay rest assured knowing that these service providers have been screened and vetted.
Vendors can play a significant role in enhancing your business significantly. This is why keeping close tabs and properly managing them is an essential task. Since some of their actions could directly impact you, then management is necessary to avoid unpalatable situations.