When you’re running a business, you probably have a few preferred vendors or suppliers that you always turn to when you need to procure certain products or services.
But, what happens when these companies face disruption and aren’t available when you need them?
Do you need to start from square one to find and vet a new supplier ASAP?
Can you reach out to a company you worked with a few years ago to see if they’re still providing the same services?
Should you forgo certain compliance checks with a new supplier to ensure you can get the product delivered on time?
Or, maybe you have an up-to-date list of approved suppliers and vendors that have already been vetted for certain quality, compliance, and risk standards.
Throughout this guide, we’ll discuss what an approved vendor list is and how it can benefit your business.
We’ll also walk you through the steps to create your own list and the key pieces of information you need to include.
What is an approved vendor list (AVL)?
An approved vendor list (AVL), sometimes called an approved supplier list (ASL), is a roster of contractors, service providers, or sellers who have met your specific quality and compliance requirements.
Put simply, it is a list of all the companies you’ve approved to source goods and services from.
What should be included in an approved vendor list?
Maintaining a solid approved vendor list requires more than just a compilation of company names that you can do business with.
There are several important details to include in your AVL that will ensure your list stays up-to-date with comprehensive and reliable information. These are typically key pieces of information you collect during the vendor onboarding process, such as:
- Vendor/supplier’s name: The legal name of the business or entity
- Contact information: The key point of contact and the phone number, email address, and physical address to get in touch with them
- Billing details: Relevant vendor billing information like their preferred method and payment terms
- Category: The types of goods or services they provide for easy reference in the future
- Approval date: When the vendor or supplier was approved to be on the list; include an expiry or renewal date if relevant for future reviews/compliance checks
- Contractual details: Any specific information, service level agreements (SLAs), or contract terms to lay out the expectations and responsibilities of the vendor
- Compliance documentation: Copies of any licenses, certifications, permits, etc. that display the vendor’s adherence to compliance requirements
Approved vendor list example
How to create an approved vendor list: 4 steps
Whether you want to create an approved vendor list from the ground up or enhance your existing one, here are some of the main steps to help you get started:
1. Identify current vendors and suppliers
First, make a list of the vendors and suppliers that you currently do business with.
This will be the starting point. Don’t worry if it’s just a few names (or none) at this point., You will continue adding to it as you expand operations.
2. Define your requirements
Clearly outline the approval criteria that a vendor needs to meet to get placed on your list.
This might include considerations like:
- Business Reputation: Reviews from third-party sites to find credible testimonials of past customers, outstanding complaints against the business, and other factors to help you assess their reputation in the industry
- Industry certifications: Any formal credentials, licenses, or certifications a vendor should have to demonstrate their expertise or meet compliance requirements
- Compliance standards: Additional documentation or due diligence assessments the vendor must undergo to meet legal and industry standards
- Insurance requirements: Proof of insurance coverage to prevent any risks or losses caused by their goods or services
Take your time here, because the criteria you establish set the foundation for your list, and will ensure you’re only working with vendors that support your overall business goals and objectives.
3. Verify vendor data and information
The criteria you defined in the previous step will help you select new vendors that meet your requirements.
But first, you need to use these same criteria to assess your current vendors and suppliers to make sure they fit the bill.
If you haven’t already, go through each of the companies on your list and verify the data and information you have on file for them. Reach out to them directly if you need further details.
With the gathered information, ensure they meet your criteria; otherwise, you’ll need to reconsider your arrangement with them.
You can use the list we laid out earlier about what you should include in your AVL to build out each vendor profile for approved companies.
4. Monitor and update the list
Creating your initial AVL is only the beginning. To get the most out of this list, you need to regularly review it and make changes to keep it relevant with up-to-date information.
You can use a vendor scorecard to monitor their performance over time.
Plus, you should assess changing market conditions and identify opportunities with new vendors, making any changes or updates to your list as needed.
When is an approved vendor list necessary?
You may think that an AVL is only necessary for large enterprises that manage dozens of vendor relationships.
However, any business that regularly procures goods and services from third parties can benefit from having an approved supplier list.
The main point of creating this list is to make the procurement process easier without compromising on quality or compliance standards—no matter the size of your business.
The vendors and suppliers on your approved list have already been thoroughly vetted and shown to meet your requirements.
So, when you need to place an order with a company on your AVL, you already have the systems and structures in place to do so and can trust that they’re a reliable vendor.
In sum, any business that wants a more efficient procurement process can benefit from creating and maintaining an approved supplier list.
Benefits of having an approved vendor list
A well-organized approved vendor list can offer many benefits, including:
Improved efficiency
One of the key benefits of having an approved vendor list is that it makes procurement more efficient.
If you need to purchase certain goods or services, you can simply refer to your AVL to see if you have an approved supplier for what you need.
From there, you don’t have to take the time to evaluate each vendor or supplier, because those included on the list have already gone through the appropriate due diligence and approvals.
So, there is little administrative work left to do aside from making the order.
Greater consistency
Maintaining an AVL helps you be more consistent with your record-keeping and vendor relationship management.
As time passes, it’s natural to put more of your effort and attention into your largest suppliers and put your smaller or lesser-used contacts on the back burner.
But, to keep an up-to-date AVL, you must be more consistent with how you stay in touch with all of your suppliers to maintain accurate and up-to-date records for each of them.
A well-structured approved vendor list will ensure the information you’re collecting and storing is consistent for all suppliers.
Stronger risk management
Having an approved vendor list can help mitigate risk, as it ensures you’re only making purchases from companies that have been thoroughly vetted.
Plus, an AVL can help you minimize supplier risk and support business continuity even if one of your go-to vendors becomes unavailable for some reason.
Maybe their operations have been temporarily impacted by a natural disaster or are facing production delays. Either way, there may come a time when a supplier is unable to provide you with the goods or services you need, when you need them.
In these cases, you can refer back to your approved vendor list to find a reliable alternative to continue supporting operations with minimal disruption.
Better quality
Since the suppliers or vendors on the approved list have been vetted and assessed, procuring from these companies can lead to better-quality products and services.
Rather than taking your chances with a random vendor that delivers you subpar goods, making a purchase from a company from your approved list is a much better option.
Typically, part of the approval process for getting on your vendor list will include some sort of product quality assessment.
So, you can assume if a supplier is on your list, they are a reputable seller that has met certain quality assurance requirements.
Not to mention, the longer you engage with a vendor and foster your relationship, they will be more inclined to improve their product or service quality.
Potential cost savings
Lastly, an approved supplier list can help your team make cost-effective purchasing decisions by only including companies that offer favorable financial terms.
Plus, the more you purchase from the preferred suppliers on your list, the more bargaining power you will have with them as your relationship continues.
One study found that procurement teams run a surplus of their annual budgets by 7% on average. So, anywhere in this process where you’re able to generate cost savings can be an advantage.
How to continue supporting the vendors on your approved list
An approved vendor list simplifies purchasing decisions while still upholding the quality and compliance standards your organization requires.
Creating an AVL helps you foster better relationships with your preferred vendors, which can lead to better product and service quality and more favorable payment terms over time.
You can further support the vendors on your list by consistently making on-time payments.
An automated AP solution like BILL can help with timely vendor invoice management, making sure they’re always paid on time by their preferred method.
To learn more about how we can help you support your approved vendors, try out BILL today.
