Long lasting vendor relationships are key to successful enterprise software purchase and service assurance. More often than not we get caught up in the excitement of the new project or product deployment that we sometimes overlook vendor due diligence. A thorough vendor due diligence policy is a critical internal compliance activity that could help us avoid pit falls.
Apart from vendor reputation concerns, it may be required to also ensure that vendor can stay afloat through the engagement and not end up insolvent. We've written about key financial, reputation and litigation checks that you should include in your vendor onboarding process. The following are a few quick cursory checks that you can perform on any third party that you're prospecting to engage with.
Ease of execution and speed is of the essence for the following vendor due diligence checklist. This will in no-way constitute a thorough diligence. That said, this is a starter and you could incorporate these in your vendor onboarding SOPs.
- Promoter Profiles
Vendors with no public promoter profiles on their website or on LinkedIn could be dubious. Well oiled companies tend to have executive quotation or basic profile of their management on the marketing assets.
- Director appointment dates
If the third-party is an India based entity, the govt. makes available various resources that you can use to validate vendors. One such resource is the MCA portal. A quick search on the ' View Company Master Data' section under the 'MCA Services' tab on this website will throw up details on all the directors of the entity and their appointment dates. Firms with freshly appointed directors could mean there has been a recent management change.
- Age of the business
The cursory search on the MCA also throws up the date of incorporation of the business. Vendors who have weathered 5 years or more in the market could potentially be less risky compared to freshly incorporated entities when it comes to internal operating procedures and client relationship management.
- Incorporation Structure
A business that is incorporated as a Private Limited entity is much better organized from the point of view of compliance compared to one that is a Partnership or Sole Proprietorship. If you're unable to find the company in the MCA portal, you may want to check with the vendor on their incorporation status. Accounting, Audit and Legal firms operate on a partnership model, but your enterprise software vendor must be a Private Limited firm.
- Credit Scores
Given the size of the order that you are looking to execute with the vendor, it may call for a credit check. Various credit rating providers make credit profiles publicly available for you to check. If the company has not been rated, you can use a service like SignalX to dig into their financial health or request the vendor to get rated. The later would take its sweet time. You can check on a firm's credit rating at Chrysl, CARE and IndiaRatings by following the marked URLs.
- Cursory Media Checks
A general search on Google News will throw up media mentions. A quick review for anything adverse will be handy. Criminal litigations against the firm for abuse or fraud would count as adverse. Civil litigations are a normal affair for most companies as they grow.
- LinkedIn headcount checks
Checking for headcount is important to understand the vendor's bandwidth. LinkedIn a great source for this. Look up the vendor's company page and it would show you the number of their employees registered on LinkedIn. A more formal way of executing this is to fetch the data from the labor department. This would take a bit of effort but is available for you by default on SignalX.
- Glassdoor & Google reviews
Too many adverse feedback on Google and Glassdoor could a cue for concern. Reading through these to identify any adverse signals is a worthwhile initiative. Although, it is to be noted that review platforms are often filled mostly with negative reviews but adverse feedback by more than few individuals could mean a possible reputation risk.
- Business Website
Something as simple as a website tells quite a lot about the vendor. If they an enterprise software service provider, in today's time there is no excuse for not having a website or having a poorly maintained one. Well run firms have well maintained websites and social pages.
- Client lists and testimonials
Client testimonials put up on a website is a good validation. However, you may also ask your vendor for client references if not mentioned. A solid client reference or testimonial goes a long way in vendor validation.
- GST compliance
The govt. has also made available the GST portal which you can use to run a cursory check on the vendor. Check their filing table for the last filing. If this is more than 6 months ago, the vendor is already in critical default and you will not be able to claim your full tax credits. If such adverse default is present, you may want to ask your vendor to update their GST filings before onboarding.
In critical engagements where you're looking to establish a long term relationship with the vendor, the above listed checks will not suffice. You can read more about about the 5 key checks that you can perform to ensure fool-proof vendor onboarding.
SignalX automates over 200 comprehensive and deep checks on your counterparties. If you're looking to put in place a comprehensive vendor screening initiative, let's talk!