10 Vendor Management Best Practices, From Planning to Exit

Vendor management best practices are ten steps for planning, choosing, contracting with, monitoring and exiting vendors, so each invoice is checked against its contract. Those steps fit the five life-cycle stages in US banking regulators’ 2023 third-party guidance, from planning through termination.

They matter most for recurring-service vendors (telecom and wireless carriers, utility and waste vendors), where contracts, rates and invoices drift apart location by location. RadiusPoint manages that spend on ExpenseLogic, its single cloud platform.

Key Takeaways

• US banking regulators’ 2023 guidance names five vendor life-cycle stages, from planning through termination, and says higher-risk vendors warrant more planning and more frequent monitoring.
• Each practice should leave a record: a signed contract with rates and an expiration date, an invoice audited against it, a ticket for each change and a disconnect confirmation.
• Four published RadiusPoint cases began with locations buying on their own and ended with savings of 28% (waste), 13.6% (cleaning), 11% (trash) and $100K+ in year one (telecom).

Short version: sort vendors by risk, put every rate and exit term in a signed contract, audit each invoice against that contract, and plan the exit before the renewal date arrives.

The Vendor Management Lifecycle: Five Stages and the Record Each One Leaves

Five stages make up the vendor management lifecycle (planning, due diligence and selection, contract negotiation, ongoing monitoring, termination), and each one should leave a record. The stage names come from US banking regulators’ guidance of June 6, 2023, which calls the life cycle continuous.

The guidance is written for banks, but any buyer can borrow the stages. It says third parties that support higher-risk activities, including critical activities, “typically warrant a greater degree of planning and consideration.” As a vendor management workflow, the stages look like this:

What Vendor Management Means When a Vendor Bills Every Month

Vendor management is how a company chooses, contracts with, pays, monitors and exits its vendors, so each one delivers what its contract promises. For vendors that bill every month (electric, gas, water and waste utilities, telecom and wireless carriers), the test is concrete: each invoice should match the rate and the service on record.

A one-time purchase ends at delivery. A utility or carrier account keeps billing every cycle until someone closes it, and each new site adds its own accounts and meters. Regulated utilities often bill from a published tariff, or rate schedule, instead of a negotiated contract. The National Association of Regulatory Utility Commissioners says its member state commissions have an obligation to ensure utility services are provided at rates and conditions that are “fair, reasonable, and nondiscriminatory.” For each recurring vendor, the record that proves performance depends on the vendor type:

In utility vendor management, someone also has to own each bill from arrival to ledger. That ownership covers invoice intake, a line-item audit against the rate and service on record, payment, and the data finance uses afterward: general ledger (GL) coding, accruals, allocation and exceptions for closed sites. All of it runs per account and meter, so it depends on a current utility meter inventory.

RadiusPoint can own that bill lifecycle for a client’s utility and telecom vendors in ExpenseLogic. That covers utility and telecom invoice intake, line-item audit against contracted rates and inventory, accrual and GL interface files, cost allocation in the client’s chart of accounts and closed-location billing exception reports. RadiusPoint can pay vendor invoices for clients once the client funds the account. In one published RadiusPoint case, a client kept paying electricity, gas and water bills for a location that had closed, at more than $1,500 a month, or over $18,000 a year.

What Happens When Every Location Hires Its Own Vendors?

When each location hires its own vendors, there’s no corporate contract, rates vary by site, and invoices are paid without a check against agreed terms. Four published RadiusPoint cases start from that pattern and end with new or consolidated contracts. Their percentage savings run from 11% to 28%.

What Are the 10 Vendor Management Best Practices?

Ten practices cover the full life cycle: segment, inventory, define service, vet, contract, audit invoices, ticket changes, score performance, assign ownership and plan the exit. Practices 1 and 2 cover planning, 3 and 4 selection, 5 contracting, 6 to 9 monitoring and 10 termination.

1. Segment what you buy by profit impact and supply risk. A vendor management strategy starts with Peter Kraljic’s 1983 Harvard Business Review categories: strategic (high profit impact, high supply risk), bottleneck (low impact, high risk), leverage (high impact, low risk) and noncritical (low impact, low risk). Watch the first two most closely.
2. Keep one inventory of every vendor, contract and location. The 2023 guidance links a complete inventory, plus periodic risk assessments, to seeing whether a vendor’s risk has changed. In a vendor management program, the inventory shows which sites each vendor serves and whether a contract exists.
3. Define the service each location needs before you source it. In the cleaning case, RadiusPoint analyzed each provider’s invoices to set a standard service level by location before one vendor was contracted for all of them.
4. Scale due diligence to the segment. The guidance says not all relationships require the same oversight. Check a strategic vendor’s finances, insurance and references more deeply than a noncritical vendor’s.
5. Put rates, fees, term and exit terms in a signed contract. The guidance says contracts that clearly describe all costs and compensation “help reduce misunderstandings and disputes over billing.” For telecom and utility spend, vendor contract management ties each rate to a service ID or meter, with the expiration date on record.

Which Vendor Management Practices Apply After the Contract Is Signed?

Five practices apply once the contract is signed: audit each invoice, ticket each change, score performance, name an owner and plan the exit. Together they leave a record: an invoice audited against the contracted rate and inventory, a ticket with an approval step, results shared with each vendor, and a disconnect confirmed in writing.

6. Audit every invoice against the contract. An invoice audit checks each line against the contracted rate and the inventory. In the elevator case, the audit validated contract rates against the current invoice and identified overage charges beyond the normal pick-up charges.
7. Route every move, add, change and disconnect through a ticket. A MACD ticket with an approval step records who asked for each change. Once the glass manufacturer’s ordering moved to a MACD portal, future orders had to go through it.
8. Score performance against the contract on a set schedule. Review strategic and bottleneck vendors against their contracted service levels and rates, and share the results with each vendor.
9. Name one owner per vendor and report up. The guidance gives the board ultimate responsibility for oversight and calls for sufficient staffing to monitor third parties. Vendor governance sets who decides what, and on what schedule.
10. Plan the exit before you need it. Know each contract’s notice dates, termination fees and transition plan before renewal, and confirm every disconnect in writing.

Vendor Performance Management Best Practices Start With the Contract

Vendor performance management works when every measure traces to a contract term, so a missed service level or wrong rate becomes a documented exception. The 2023 guidance says a service-level agreement can specify measures used to “monitor performance, penalize poor performance, or reward outstanding performance.”

For recurring-service vendors, billing accuracy belongs on a vendor scorecard next to uptime and response time. In the landscaping case, a company with 500+ locations had AP staff handling 1,300+ utility bills a month before RadiusPoint took over invoice processing and payment. Audits there run by meter number and type of service, and each quarter RadiusPoint prepares a report using key performance indicators (KPIs) to track spending levels and ROI.

How Do You End a Vendor Relationship Without Paying for It Twice?

End a vendor relationship by settling notice dates, termination fees, transition and data handling before giving notice, then confirm the final disconnect and final invoice. The 2023 guidance lists options for transition, “costs and fees associated with termination,” and data retention and destruction among the factors to weigh.

In the elevator case, staggered expiration dates and early termination fees ruled out one corporate contract in the first twelve months. Telecom agreements add notice windows that can renew a term if they pass unnoticed. After the exit, keep checking: a closed location can keep receiving bills for services nobody uses.

How RadiusPoint Applies These Practices to Telecom, Wireless and Utility Vendors

RadiusPoint applies these vendor management practices to telecom, wireless, utility and waste vendors through ExpenseLogic, a single cloud platform, with RadiusPoint staff working the invoices. Its published cases also cover facility services such as cleaning. It isn’t a general third-party risk, cybersecurity rating or financial-health rating service.

In ExpenseLogic, vendor contract management ties expiration dates and rates to service IDs, with contract obligation alerts covering termination fees and dates. Line-item audit covers wireline, wireless and data circuits, and RadiusPoint’s utility expense management audits electricity, gas, water, sewer and waste at the meter level.

RadiusPoint staff chase the carriers, file the disputes and close the tickets, and RadiusPoint can pay vendor invoices for clients once the client funds the account. Founded in 1992, RadiusPoint is a women-owned business. ExpenseLogic holds a 4.8 rating on Capterra from 31 reviews, with reviews through December 2025, and Amalgam Insights named RadiusPoint a Distinguished Vendor on its 2024 Telecom Expense Management (TEM) Vendor SmartList.

Every month a location keeps a vendor with no contract, the same unchecked charges repeat. Request a free demonstration of the ExpenseLogic Contract Management and Reporting and Analytics modules.

Frequently Asked Questions

Do the 2023 interagency third-party guidelines apply to companies that aren’t banks?

No, the 2023 guidance is directed to banking organizations supervised by the three federal agencies that issued it, and it doesn’t bind other companies. Its five-stage life cycle still works as a reference for any buyer, since a waste hauler or wireless carrier goes through the same stages.

What should a vendor management policy include?

A vendor management policy should say who may sign with a vendor, how vendors are segmented by risk, what due diligence each segment needs, which terms every contract carries, and how performance reviews and exits work. The 2023 guidance’s 17 contract factors, from nature and scope of arrangement to default and termination, make a practical checklist.

Is telecom vendor management different from managing other vendors?

Telecom vendor management follows the same life cycle, but the records are finer-grained: rates attach to circuits, lines and service IDs, and each location can carry its own account. That makes line-item audit against contracted rates and inventory the core monitoring practice.

How is vendor management different from vendor governance?

Vendor management is the day-to-day work of contracting with, monitoring and paying vendors, while vendor governance sets the decision rights, approval limits and review cadence that work follows. The 2023 guidance draws a similar line for banks: the board oversees, and management develops and runs the policies and practices.

How is vendor management different from procurement?

Procurement focuses on buying, while vendor management covers the vendor’s whole life cycle, from selection and contract terms through monitoring, invoice checks, changes and exit. Procurement finds suppliers, runs bids and negotiates the deal. For a utility or carrier account, the buying decision may come up only when a contract ends, while vendor management work repeats every billing cycle.

Is a vendor management system the right tool for utility and telecom bills?

Usually not, because a vendor management system (VMS) most often means software for buying and managing staffing services and contract labor. Some procurement suites use the name for supplier onboarding and records. Utility and telecom bills need a system that holds each account, meter or service ID with its contract rate or tariff, then audits every invoice line against it.

References

1. Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency, “Interagency Guidance on Third-Party Relationships: Risk Management,” Federal Register document 2023-12340, 88 FR 37920, June 9, 2023 (final as of June 6, 2023). federalregister.gov
2. Board of Governors of the Federal Reserve System, “Interagency Guidance on Third-Party Relationships,” June 6, 2023. federalreserve.gov
3. Peter Kraljic, “Purchasing Must Become Supply Management,” Harvard Business Review, September 1983. hbr.org
4. RadiusPoint, “Waste Services Case Study: 28% Reduction in Trash Spend,” January 19, 2024.
5. RadiusPoint, “Vendor Management: 13.6% Savings on Cleaning Services,” October 9, 2022.
6. RadiusPoint, “Glass Manufacturer Saves $100K On Telecom Expenses,” May 22, 2023.
7. RadiusPoint, “Finding Hidden Money in your Trash,” August 25, 2019.
8. RadiusPoint, “Vendor Billing Audits for a Nationwide Landscaping Company,” November 16, 2022.
9. RadiusPoint, “About RadiusPoint,” accessed October 2026.
10. Capterra, “ExpenseLogic” product reviews, 4.8 from 31 reviews, accessed October 2026. capterra.com
11. Amalgam Insights, “Amalgam Insights Unveils Vendor SmartList for Telecom Expense Management, Spotlighting 11 Distinguished Solutions,” EIN Presswire, February 1, 2024. einpresswire.com
12. National Association of Regulatory Utility Commissioners, “History & Background,” accessed November 2026. naruc.org
13. RadiusPoint, “Utilities Mismanagement Costs $18K in Unnecessary Expenses,” October 10, 2022.

This article is general information for finance, procurement, IT and facilities buyers, not legal, regulatory or contract advice. RadiusPoint outcomes cited here come from specific published client engagements on the case pages listed in References, and results vary by organization.