Vendor Management: Onboarding to Payments
- Sagar Shah
- 12 hours ago
- 10 min read
An overview guide for vendor management from the retail perspective
Executive Summary
Vendor management in retail organizations encompasses the entire lifecycle of supplier relationships, from initial onboarding through ongoing payment processing. This comprehensive guide explores the end-to-end process, examining both the United States and Indian market contexts, highlighting critical challenges, and providing actionable insights for vendor experience optimization. In today's interconnected retail ecosystem, effective vendor management directly impacts:-
supply chain efficiency
cost optimization
compliance adherence
customer satisfaction.
Organizations operating across US and India face unique regulatory, technological, and cultural considerations that shape their vendor management strategies.
Key Statics
30-90 days (US)
45-120 days (India)
Average vendor onboarding time
2-5%
Of annual procurement spend lost to payment processing errors
68%
Of vendor disputes arise from invoice discrepancies
40-60%
Cost reduction through automation
1. Introduction to Vendor Management in Retail
Vendor management represents the strategic approach to sourcing, onboarding, engaging, and managing suppliers who provide goods and services to retail organizations. In the retail sector, where thin margins and intense competition demand operational excellence, effective vendor management becomes a critical competitive differentiator.
Vendor lifecycle consist of various stages
1. Identification & Selection
Sourcing potential vendors, RFP process, evaluation
2. Onboarding
Documentation, compliance, system setup
3. Contracting
Agreement negotiation, terms, pricing
4. Transaction Processing
PO, delivery, invoicing, payment
5. Performance Management
KPI tracking, scorecards, reviews
6. Relationship Management
Communication, collaboration, innovation
Market Context: US vs India
United States Context
The US retail market is characterized by mature infrastructure, sophisticated technology adoption, standardized processes, and stringent regulatory compliance requirements including SOX, FCPA, and various industry-specific regulations. Vendors typically have established systems and processes, with strong emphasis on automation, data security, and audit trails.
Indian Context
India's retail landscape presents a mix of organized and unorganized sectors, with varying levels of digital maturity. The GST implementation has brought significant changes to invoice and payment processes. The ecosystem includes everything from sophisticated large vendors to small local suppliers with limited digital capabilities. Cultural factors, relationship-based business practices, and regional diversity add complexity to vendor management.
Full article has been summarized in the below video
2. Vendor Onboarding
Vendor onboarding is the foundational step in establishing a successful supplier relationship. A well-structured onboarding process ensures compliance, reduces risk, and sets clear expectations for the partnership.
Pre-Onboarding: Vendor Assessment
Before formal onboarding begins, organizations conduct comprehensive vendor assessments to evaluate suitability:
Financial Stability: Review financial statements, credit ratings, banking references
Operational Capability: Assess production capacity, quality systems, delivery infrastructure
Compliance Status: Verify licenses, certifications, regulatory compliance
Risk Profile: Evaluate cybersecurity, business continuity, reputation
References: Contact existing clients, review market reputation
Onboarding Documentation Requirements
This is indicative list of documents and not exhaustive. Documents may vary as per the customers document
Document Category | US Requirements | India Requirements |
Legal Identity | EIN, Articles of Incorporation, Business License | PAN, CIN/LLP, GST Registration, Shops & Establishment |
Tax Documents | W-9 Form, State Tax ID, Sales Tax Permit | GST Certificate, TAN, PF Registration, ESI Registration |
Banking | ACH Authorization, Banking Letter, Cancelled Check | Cancelled Cheque, Bank Statement, NEFT/RTGS Details |
Insurance | General Liability, Workers Comp, Professional Liability | Public Liability, Product Liability, Professional Indemnity |
Compliance | SOC 2, ISO Certifications, Industry-specific | ISO Certifications, BIS Standards, FSSAI (if applicable) |
Onboarding process flow
✅ 8-Step Onboarding Workflow
Step 1: Portal Access
Vendor receives invitation to self-service portal with unique credentials.
Step 2: Information Submission
Vendor completes profile: company details, contacts, products/services, banking, tax information.
Step 3: Document Upload
Upload required certificates, licenses, insurance, agreements.
Step 4: Internal Review
Procurement validates information; Finance verifies tax and banking; Legal reviews agreements; Compliance checks certifications.
Step 5: Due Diligence
Background checks, financial analysis, reference verification, site visits (if required).
Step 6: Approval Workflow
Multi-level approvals based on vendor risk category and spend threshold.
Step 7: System Setup
Create vendor master record in ERP, configure payment terms, set up catalog.
Step 8: Welcome & Training
Vendor onboarding session, portal training, process documentation, contact assignments
Vendor Categorization
When you think about onboarding then there are majorly two types of vendors
Regular vendors: Vendors which frequently does transaction or are high value vendors.
You can further consider type of vendor within regular vendors that can help design your onboarding flow better.
Strategic Vendors: High value, critical to operations, requires executive oversight.
Preferred Vendors: Established relationships, reliable performance, volume discounts.
Approved Vendors: Qualified for specific categories, standard terms.
One Time Vendors: You do not deal with these vendors frequently. Its either one-time or occasional purchase.
Spot Vendors: One-time or occasional purchases, simplified onboarding.
⚠️ Common Onboarding Challenges
Lengthy Timeline: Average 30-120 days from initiation to first transaction
Documentation Gaps: Incomplete or expired documents causing delays
Manual Processes: Paper-based workflows creating bottlenecks
Lack of Standardization: Different requirements across departments
Poor Communication: Vendors unaware of status or requirements
System Integration: Disconnected systems requiring duplicate data entry
India-Specific: GST compliance verification, regional language barriers, varying digital literacy
US-Specific: Multi-state registration requirements, complex insurance verification, stringent data privacy compliance
3. Vendor Master Data Management
Vendor master data forms the foundation of all vendor transactions. Accurate, complete, and well-maintained vendor master data is essential for smooth procurement, invoicing, payment, and reporting processes.
What details to be added in vendor master data management ? This is a very broad question and also information may vary organization by organization. Easiest way is to categorize information something that ERP system such as SAP, Oracle does very well.
Categorization of master data
General Information
Vendor ID, Legal name, DBA, Type, Category, Parent company, Business classification
Contact Information
Primary contacts, Phone/email, Physical addresses, Time zones, Communication preferences
Financial Information
Banking details, Payment terms, Currency preferences, Credit limits, Discount terms
Tax & Regulatory
Tax IDs (EIN/PAN), GST/Sales Tax, TDS/1099 info, Compliance certificates, MSME registration
Master Data Governance
Effective vendor master data management requires robust governance frameworks:
Data Ownership: Assign clear accountability for master data accuracy
Change Control: Formal process for master data updates with approval workflows
Validation Rules: Automated checks for data completeness, format, and accuracy
Regular Audits: Quarterly reviews of master data quality
Duplicate Prevention: Systematic checks to prevent duplicate vendor creation
Deactivation Process: Clear criteria and workflow for vendor inactivation
⚠️ Master Data Challenges
Data Quality Issues: Incomplete, inaccurate, or outdated information
Duplicate Records: Multiple vendor IDs for same entity
Decentralized Maintenance: Lack of central control leading to inconsistencies
System Fragmentation: Vendor data spread across multiple systems
Vendor Non-Compliance: Vendors failing to update information proactively
India-Specific: Frequent GST registration changes, multiple state registrations
US-Specific: Complex multi-entity structures, varying state requirements
4. Purchase Order Data Processing
Purchase orders represent the formal commitment to procure goods or services from vendors. Effective PO processing ensures clear communication of requirements, enables proper authorization, and creates an audit trail for all procurement activities.
Purchase Order Types
Standard PO: One-time order for specific goods/services with defined quantity and delivery
Blanket PO: Agreement for recurring purchases over a period with estimated quantities
Contract PO: Long-term agreement with scheduled releases and deliveries
Planned PO: Future orders with scheduled delivery dates
Emergency PO: Expedited orders with shortened approval process
PO Creation Process
📝 Purchase Order Workflow
1. Purchase Requisition
Requesting department creates requisition with item details, quantities, delivery requirements
2. Vendor Selection
Select approved vendor based on price, quality, delivery time, past performance
3. PO Generation
System creates PO with unique number, line items, pricing, terms, delivery instructions
4. Approval Routing
PO routes through approval workflow based on amount thresholds and business rules
5. PO Transmission
Approved PO sent to vendor via EDI, email, or vendor portal
6. Vendor Acknowledgment
Vendor confirms PO acceptance and provides estimated delivery date
⚠️ PO Processing Challenges
Maverick Spending: Purchases made outside of PO process
PO-Invoice Mismatches: Discrepancies between PO and actual invoice
Approval Delays: Bottlenecks in approval workflow causing delays
Manual Data Entry: Errors from manual PO creation
Lack of Visibility: Difficulty tracking PO status and open orders
India-Specific: HSN code errors affecting GST, complex multi-state tax implications
US-Specific: Sales tax calculation complexity across jurisdictions
5. Goods Receipt and Quality Control
The goods receipt process verifies that ordered items have been delivered according to purchase order specifications. This critical step enables accurate inventory management, triggers payment processing, and ensures quality standards are met.
Goods Receipt Process
📦 Receiving Workflow
1. Delivery Arrival
Vendor delivers goods with packing slip and relevant documents
2. Initial Verification
Receiving team matches delivery to open PO, verifies vendor and delivery location
3. Physical Inspection
Count quantities, inspect for visible damage, verify item descriptions match PO
4. Quality Check
Perform quality inspections based on item category and business rules
5. System Recording
Create goods receipt in ERP system, update inventory, note any discrepancies
6. Exception Handling
Process returns, rejections, or partial receipts with vendor notification
Quality Control Procedures
QC Level | When Applied | Inspection Scope |
Level 1: Visual Inspection | All deliveries | Count quantities, check for external damage, verify labeling |
Level 2: Sampling | High-value or critical items | Random sample testing, functionality checks, measurements |
Level 3: Comprehensive | New vendors, history of quality issues | 100% inspection, detailed testing, complete documentation |
6. Invoice Processing and Reconciliation
Invoice processing is a critical component of the procure-to-pay cycle. Efficient invoice management ensures timely vendor payments, maintains good supplier relationships, and enables accurate financial reporting.
Three-Way Matching Process
🔍 Invoice Validation - Three-Way Match
Purchase Order
Items ordered, Quantities, Agreed prices, Terms and conditions
Goods Receipt
Items received, Actual quantities, Quality accepted, Receipt date
Invoice
Items billed, Billed quantities, Prices charged, Payment terms
✓ All three documents must match for automatic approval
Invoice Processing Workflow
1. Invoice Receipt & Data Capture
OCR or manual entry of invoice data into system
2. PO Matching
System automatically matches invoice to corresponding purchase order
3. Three-Way Match
Validate invoice against PO and goods receipt records
4. Tax Validation
Verify GST/sales tax calculations and compliance
5. Approval Routing
Route exceptions and discrepancies to appropriate approvers
6. Posting
Post approved invoices to accounting system
7. Payment Scheduling
Schedule payment based on payment terms and due dates
GST Compliance in India
Requirement | Details |
Invoice Format | Must contain GSTIN, HSN/SAC codes, place of supply, tax breakdown (CGST/SGST/IGST) |
E-Invoice | Mandatory for businesses above threshold, requires IRN (Invoice Reference Number) generation |
Tax Categories | CGST, SGST, IGST based on transaction type and location (intra-state vs inter-state) |
ITC Claims | Input Tax Credit eligible only on compliant invoices with valid GSTIN |
Filing Deadlines | GSTR-1 (outward), GSTR-3B (summary) monthly filing requirements |
⚠️ Invoice Processing Challenges
Matching Errors: Discrepancies between PO, goods receipt, and invoice causing approval delays
Duplicate Invoices: Same invoice submitted multiple times leading to duplicate payments
Missing Information: Incomplete invoice data requiring manual follow-up
Tax Calculation Errors: Incorrect GST/sales tax calculations
India-Specific: GST reconciliation complexity, e-invoice compliance, ITC matching challenges
US-Specific: 1099 reporting requirements, state tax complexity, varying exemption rules
7. Vendor Payment Processing
Vendor payment is the final step in the procure-to-pay cycle. Timely and accurate payments are crucial for maintaining healthy vendor relationships, securing favorable terms, and ensuring supply chain continuity.
Payment Methods
Payment Method | US Common Usage | India Common Usage | Processing Time |
ACH / NEFT | Primary method for domestic payments | Widely used for all payment sizes | 1-2 business days / Same day |
Wire / RTGS | High-value, urgent payments | High-value payments above threshold | Same day / Real-time |
Check / Cheque | Declining, legacy vendors only | Still common for smaller vendors | 5-7 business days |
International Wire | Cross-border payments | Import payments | 2-5 business days |
Payment Processing Workflow
💰 Payment Process Steps
1. Payment Run Selection
Select approved invoices due for payment based on payment terms and due dates
2. Payment Proposal
System generates payment proposal with vendor details, amounts, and payment methods
3. Payment Approval
Multi-level approval based on payment amount thresholds
4. Payment File Generation
Generate bank file (ACH, NEFT, RTGS) with payment instructions
5. Bank Transmission
Secure transmission of payment file to banking system
6. Payment Confirmation
Receive confirmation from bank and update payment status in system
7. Remittance Advice
Send remittance advice to vendors with payment details and invoice references
8. Reconciliation
Reconcile bank statements with payment records
Payment Terms and Optimization
Payment Terms | Description | Advantage |
Net 30/60/90 | Payment due in 30/60/90 days from invoice date | Standard terms, predictable cash flow |
2/10 Net 30 | 2% discount if paid within 10 days, otherwise net 30 | Cost savings through early payment discounts |
EOM (End of Month) | Payment due at the end of the month | Simplified payment scheduling |
COD (Cash on Delivery) | Payment due upon delivery of goods | Reduced credit risk for vendors |
Advance Payment | Payment before goods/services delivered | Vendor financing, better pricing |
⚠️ Payment Processing Challenges
Duplicate Payments: Same invoice paid twice due to poor controls
Banking Errors: Incorrect account details causing failed payments
Payment Delays: Missing approvals or documentation causing late payments
Reconciliation Issues: Difficulty matching payments to invoices
Fraud Risk: Vendor impersonation and payment diversion attempts
India-Specific: TDS (Tax Deducted at Source) calculation and compliance, Form 26AS reconciliation
US-Specific: 1099 reporting, escheatment laws for unclaimed payments, state-specific requirements
8. Vendor Performance Management
Vendor performance management is essential for ensuring suppliers meet quality, delivery, cost, and service expectations. A structured approach to performance evaluation drives continuous improvement and strengthens vendor relationships.
Key Performance Indicators (KPIs)
📊 Vendor Performance Metrics
Quality Metrics
• Defect rate• Quality acceptance rate• Return rate• Customer complaints
Delivery Metrics
• On-time delivery rate• Order fulfillment rate• Lead time accuracy• Backorder frequency
Cost Metrics
• Price competitiveness• Cost savings delivered• Invoice accuracy• Total cost of ownership
Service Metrics
• Responsiveness• Issue resolution time• Documentation accuracy• Communication quality
Vendor Scorecard System
Performance Category | Weight | Measurement | Target |
Quality | 30% | Defect rate, acceptance rate | < 1% defect rate |
Delivery | 30% | On-time delivery percentage | > 95% on-time |
Cost | 20% | Price competitiveness, invoice accuracy | Market competitive |
Service & Support | 10% | Response time, issue resolution | < 24 hrs response |
Compliance | 10% | Documentation, certifications | 100% compliant |
Performance Review Process
Monthly Reviews: Automated scorecard generation and trend analysis
Quarterly Business Reviews: Formal meetings with strategic vendors to discuss performance, issues, and improvement plans
Annual Evaluations: Comprehensive vendor assessment for contract renewal and relationship tier adjustment
Continuous Monitoring: Real-time dashboards for tracking critical metrics
Corrective Action Plans: Structured improvement plans for underperforming vendors
Vendor Development Programs
Leading organizations invest in vendor development to enhance supplier capabilities:
Training Programs: Quality management, process improvement, technology adoption
Collaborative Improvement: Joint kaizen events, process optimization initiatives
Technology Enablement: Support for system integration, portal adoption, automation
Financial Support: Early payments, financing arrangements for growth investments
Knowledge Sharing: Best practice exchange, industry benchmarking
10. Vendor Onboarding
Conclusion
Vendor management is a strategic imperative for retail organizations operating in the complex, dynamic environments of the US and India. By implementing robust processes, leveraging technology, and fostering collaborative vendor relationships, organizations can achieve operational excellence, cost optimization, and competitive advantage.
The journey from vendor onboarding to payment encompasses multiple touchpoints, each presenting opportunities for improvement. Organizations that invest in vendor management excellence—through automation, analytics, and relationship building—will be better positioned to navigate supply chain challenges, ensure compliance, and drive sustainable growth in both markets.
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