3 Dangers of Using Spreadsheets for Vendor Management

A growing number of companies still rely on outdated vendor management resources (we’re looking at you, spreadsheet templates).

While they’re an effective tool to track, analyze, and report data of all kinds, spreadsheets aren’t suitable for every purpose.

Managing vendor relationships throughout individual contract periods means your vendor program is all about the numbers—HR and procurement departments handle high-value contracts, comprehensive budgets, and competing timelines.

So the logical solution would be spreadsheet templates, right?

For established vendor programs and contract management, definitely not.

Vendor management entails intricate processes and steady attention to data to maintain accuracy and program compliance. And spreadsheets lack the critical functionality to manage these tasks.

Further, they introduce significant dangers that organizations can’t afford to face, let alone resolve.

The Risky Business of Spreadsheets for Managing Staffing Vendors

Fact: The US alone has over 20,000 recruiting and staffing agencies, and 55% of them are in the contract sector, which generated an impressive revenue of more than $142 billion in 2017.

For mid-market organizations, 8-10 staffing partners—depending on the type of role—are usually sufficient to supply the specialized talent they need. (This number of suppliers is ideal for increasing volume to drive down rates.)

In theory, spreadsheets are adequate for tracking and performing basic calculations on data about your staffing suppliers.

Think rates, total spend, spend by position, engagements and engagement quality metrics, and compliance data that tell HR, procurement, and business leaders everything they need to know about contingent labor at your organization.

But creating and inputting formulas that are advanced enough to provide a clear picture of your contingent workforce program, including comprehensive budgets and data analyses, takes a dedicated team of skilled spreadsheet gurus.

Put simply, managing vendor relationships, contracts, budgets, and documentation within your vendor program surpasses the functionality that spreadsheet templates offer.

Using spreadsheets as your vendor management tool isn’t effective, or even practical, especially because they can result in some major pitfalls like

  • Expensive data entry errors
  • Compliance and reputational risks
  • Inefficient workflows that can’t scale.

1. Expensive Data Entry Errors

A common structure for vendor programs is shared responsibility between HR, procurement, and even legal. But involving multiple leaders across departments to manage vendors can mean fragmented and decentralized processes and policies.

If your team uses spreadsheets as part of its vendor program, managers are likely submitting various versions of a spreadsheet template, in which errors can creep in and compound. Some small—but highly dangerous—errors include

  • Making simple typos or a wrong function
  • Applying or changing formulas incorrectly
  • Using an outdated version of a spreadsheet template.

The potential for errors is higher than you might imagine. In fact, as many as 88% of Excel spreadsheets contain some type of error. In all likelihood, your spreadsheets do too.

Now your team must face the almost impossible task of identifying errors, recalculating formulas in every spreadsheet, following up with users to fix the errors, and confirming spreadsheets are updated accurately moving forward.

Such errors are not trivial. Vendor contract or financial errors at a mid-market organization could result in hundreds of thousands of dollars in misspent funds, excessive budgets, and noncompliance fines.

You might also like: 6 Steps to Prepare for a Vendor Compliance Audit

2. Compliance and Reputational Risks

With dozens of spreadsheets floating around in emails, chats, and on desktops, the possibility for a security breach is high.

Perhaps worse, this reduced control over your program and vendor data limits your organization’s ability to ensure compliance with industry and federal regulations.

Security and audit trail requirements must be a top priority throughout your vendor management processes. Both your internal audit team and external auditors demand evidence of security, policy, and vendor compliance, and these need to be well documented.

Spreadsheets can’t facilitate that level of documentation and are thus prone to incurring compliance risks. Here are two probable scenarios that can occur:

  • Managers don’t set standard guidelines for template use – Without uniform requirements for navigating and updating spreadsheets, managers won’t know best practices for template use, resulting in inconsistency and repeated errors.
  • Data is dispersed across a vendor program – Storing and tracking vendor data in multiple systems and managing contract documentation across departments makes it difficult to ensure and prove continuous compliance.

When internal and federal audits reveal instances of noncompliance, the repercussions can impact your vendor program spend, your employer brand, and ultimately, your organization’s bottom line.

Related content: 5 Metrics to Measure Risk in Your Contingent Labor Program

3. Inefficient Workflows that Can’t Scale

As mentioned earlier, vendor management programs require involvement from several departments. But static spreadsheets can’t handle live updates from multiple contributors.

The format requires either sharing the master copy from person to person or creating duplicates. Either method decelerates the process and leaves the door open to altered fields, mismanaged formulas, and other errors.

And beyond daily vendor management processes, even the most successful and productive vendor programs require routine measurement, analysis, and revision.

Using spreadsheets to aggregate your vendor data is cumbersome and requires your team to complete manual tasks, including

  • Assembling and inputting data
  • Sorting by specific fields
  • Entering each formula needed to generate desired results.

What does all this work add up to?

The success of your program will be compromised by inefficiency, creating both real and opportunity costs.

The Formula for Productive Vendor Management Programs

It’s clear that spreadsheet templates fall short of what’s needed to effectively manage vendors, contracts, and program budgets. Given the business impacts at stake, organizations have a compelling business case for migrating away from spreadsheet templates and adopting a vendor management system (VMS)—a solution with built-in functionality that automates and optimizes program processes.

With the right VMS solution in place, HR and procurement teams can shift from a manual approach that’s fraught with risk to more strategic efforts, including improving the quality and efficiency of their vendor management program.

Building a business case for a VMS? Begin with a step-by-step guide [infographic].

CTA banner on automating and streamlining vendor management


Meet the Expert
Jay Grissom – Vice President of Account Management & Operations

Jay Grissom has more than 22 years of experience in managing contingent workforce solutions. He leads the VectorVMS team of program managers, who help clients optimize their contingent workforce programs through strategic planning, process improvements, and compliance and operational services. He also manages a team of consultants who lead implementation and ensure VectorVMS clients are able to achieve their workforce strategy with our vendor management system. Jay’s prior experience includes leading HR staffing teams at IBM, where he was responsible for full lifecycle recruitment, implementation of an applicant tracking system (ATS), and driving compliance.

He has developed the overall strategy for and executed vendor management systems for Fortune 500 companies across both the US and Canada. He is committed to working closely with his team to ensure client satisfaction is achieved, and to ensure our products align with, and promote, our clients’ goals and objectives. Connect with him on LinkedIn.