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What is Vendor Due Diligence?

Vendor Due diligence is the risk management step of an organization’s procurement process. It includes a variety of activities such as: identifying and evaluating vendors, understanding vendor types and features, analyzing vendor risks and vulnerabilities, selecting suitable vendors, monitoring vendors for compliance with contractual obligations, and many others.

Why do Firms need a Vendor Due Diligence Freelance Expert?

Fintalent’s array of Vendor Due Diligence consultants first take a look at any current or future legal requirements that a business must comply with. If the business is in an industry that has any potential legal liability, then they ensure that the Vendors a company is working with are compliant. This may mean choosing a highly regulated vendor or products that are compliant with internet security mandates. For example, financial institutions are heavily regulated by the US federal government, at both the state and federal level. All vendors which have contracts/services/products with these institutions must ensure they are compliant with all applicable laws and regulations.

Documenting Vendor Management practices also greatly assists in ensuring system compliance while documenting risk management programs for auditing purposes. Regular audits and reviews helps ensure compliance with vendor management and risk management policies. Even if a company does not have a formal program in place, our team of consultants would ensure there is some level of system security awareness program. This can be implemented through meetings with team members, by holding weekly meetings on the potential risks involved. This will help employees understand where their data lives on the network, help to identify deficiencies in current procedures, and ultimately hold them accountable for adhering to said procedures.

While documenting company procedures will greatly assist in ensuring compliance with external regulators/laws/regulations, it is just as important to document any internal policies that are being enacted by leadership. By doing this, our consultants ensure that all team members are aware of the policies, and that they adhere to them.

How Fintalent’s Freelance Experts Carry out Vendor Due Diligence

The first step is to identifying all vendors and understand where the risks lie. Sometimes the vendor is unaware of certain financial or legal issues that could become a problem. While it is wise for a company to not assume that every vendor knows everything, there are some deliberate steps taken by our freelance experts to minimize associated risks:

  1. Hire a specialist in Fundamental research Consultancy and Corporate Governance Consultancy who specializes in government contract analysis. This person should be able to identify the correct reporting standards and recognize which ones don’t exist.
  2. Identify and determine the right reporting standards for the type of vendor. For example, a government contract specialist might be familiar with different reporting standards than a software development company.
  3. Find out if the vendor has been audited recently. Some vendors have been identified as frauds due to their unwillingness to reveal information that could compromise their profits or their financial position.
  4. Hire a lawyer who specializes in government contract law and negotiate an additional requirement by name (such as auditing every year). This will prevent any potential problems from arising at a later date.
  5. When multiple vendors are involved in a transaction, the due diligence process takes more time and effort, but it will prevent potential problems from arising later on. Vendors should be questioned about their financial position. A financial statement audit should be performed on a company’s books and records. If a company refuses to grant a request for a copy of its balance sheet or to grant an audit, you can inform the vendor that you will need to seek legal advice.

The concern of whether the vendor is going bankrupt is understandable. The goal of specialists is to make sure that the financial health of the vendor is sound and that no hidden liabilities might jeopardize success with this transaction. The following questions should help determine the financial health of the vendor:

a) Has the company been audited recently?

b) Has the vendor been visited by financial advisors?

c) Have they filed and paid their taxes? (You can confirm this information with the IRS if you wish)

d) Have they filed for bankruptcy in the last five years? It is illegal to play games with bankruptcy. The company should provide proof that it has filed for bankruptcy and proof that it has been reviewed by a professional (like a Freelance Credit Consultants). If no proof is provided, assume that the company is not reporting all its expenses and profits as required by law.

e) Does the vendor have a stable cash flow? Has the company been able to pay its bills on time? If a vendor has a credit rating, then it’s a good idea to get a copy of these documents and read them carefully. Consultants don’t want to get involved with a vendor that is having trouble paying its bills. If they do, then they will have to cover for its problems. This could include paying its suppliers or performing services for free until the firm gets back on track.

f) The vendor should show how it intends to get new business in this economic environment.

g) What has been the history of the vendor? Review any public information. Ask the vendor to bring the necessary documentation.

h) Is it a government contractor? (You can get a copy of this report from your local government office.)

i) Will the company be able to fulfill their obligations in this economic environment? For example, what is their profit margin? Look for signs that indicate that they aren’t operating at full capacity and will have difficulty paying their bills in a recession. On a purchasing agreement, define performance requirements and define any penalties for being late or failing to meet deadlines. If you have doubts, take out insurance.

j) If the vendor is new, then run its credit report. This will be a valuable piece of information.

Once they determine that the company is financially sound, it’s time to move on to other important areas of concern. Below are some of the most important ones:

Ask a Consultants to prepare a Balance Sheet for the last 3-5 years. This includes reviewing any financial statements or tax returns filed with any government agencies (like the IRS). Remember that if you plan on taking over this contract, you will be responsible for any taxes owed by the vendor. If they are not up-to-date with their taxes, then you will have to cover them for this expense until they get caught up.

If there is any debt other than mortgage debt, then you may also want to take out a small amount of insurance. You could get a line of credit, fiscal cliff insurance or payment bond insurance.

Review the payment terms for the vendor’s invoice and make sure it will be payable within 30 days. If the invoice is past due, then you could request a small advance payment from the vendor or ask them to make arrangements for payment through terms like escrow or net 30 (30 days after receipt). Make sure that this request does not violate any contractual agreement.

Ask the vendor for any additional supporting documentation to account for previously awarded contracts. Ask them to provide you with a list of all previous awards, including the names of the customers.

If you are concerned about lawlessness in your purchase, then do not hire an escrow agent to handle any payments. This could present a conflict of interest in the event that the vendor does not live up to its obligations when responsible responsibilities are inconsistent. You will need to be careful when selecting an escrow agent that doesn’t have conflicts with vendors it works with regularly. The Financial Industry Regulatory Authority (FINRA) has published a list of conflicts of interest in escrow agents. Read this before making important financial decisions regarding your contract.

You should select a vendor that can handle your business in an economic environment where you are likely to be profitable. If the vendor has been rewarded in the past, then demand documentation of this information. Note that even if they have won awards in the past, they may not be able to re-compete for these contracts if their financial condition has deteriorated since winning these awards.

Consider the challenges you will face with average vendors in this business environment. Will they be able to meet these challenges? If they are just starting out, then ask them about their personal resources and how they intend to get new business in this competitive environment. Ask them to provide proof that they are just getting started by showing you their bank statements.

Do they have a stable cash flow? If they have been in business for many years, then it’s a sign that they can handle challenges. This is a good sign. The more years the vendor has been in business, the better. If you plan to raise any money from your investors or lenders, then you will need a good reputation and a track record of success in the market.

Selecting a Vendor should be a conscious decision. Vendors should not be chosen simply because one vendor has a higher rating than other vendors, or because they have a good track record. There are many factors that must be considered when selecting a vendor. These include a company’s product requirements, vendor reputation, and competitor analysis. There are many sources that can help you analyze your potential vendors and Fintalent not only offers an array of skilled consultants but also offer a pool of consultants across all layers of business development and financial intelligence to help your business flourish.

Hire the best Vendor Due Diligence specialists in 2,900+ industries

Fintalent is the invite-only community for top-tier M&A consultants and Strategy talent. Hire global Vendor Due Diligence consultants with extensive experience in over 2,900 industries. Our platform allows you to build your team of independent Vendor Due Diligence specialists in 48 hours. Welcome to the future of Mergers & Acquisitions!

Why hire top Vendor Due Diligence experts?

Trusted Network

Every Fintalent is exclusively invited and vetted.

Ready in 48h​​​

Hire efficiently. Your M&A team is ready in 2 days or less.​​​​

Specialized Skills​

Fintalents are best-in-class - and specialized in 2,900+ industries.​

Code of Ethics​​

We guarantee highest integrity and ethical principles.​​​

Selected Clients and Partners

Frequently asked questions

Most frequent questions and answers

What clients usually engage your Vendor Due Diligence Consultants?

We work with clients from all over the world. Our clients range from enterprise and corporate clients to companies that are backed by Private Equity or Venture Capital funds. Furthermore, we work directly with Family Offices, Private Equity firms, and Asset Managers. Most of our enterprise clients have dedicated Corporate Development, M&A, and Strategy divisions which are utilizing our pool of Vendor Due Diligence talent to add on-demand and flexible resources, expertise, or staff to their in-house team.

How is Fintalent different?

Fintalent is not a staffing agency. We are a community of best-in-class Vendor Due Diligence professionals, highly specialized within their domains. We have streamlined the process of engaging the best Vendor Due Diligence talent and are able to provide clients with Vendor Due Diligence professionals within 48 hours of first engaging them. We believe that our platform provides more value for Corporates, Ventures, Private Equity and Venture Capital firms, and Family Offices.

Our Hiring Process – What do ‘Community-Approach’ and ‘Invite-to-Apply’ mean?

‘Invite-to-Apply’ is the process by which we shortlist candidates for the majority of projects on our platform. Often, due to the confidential nature of our clients’ projects, we do not release projects to our whole platform but using the matching technology and expertise of our internal team we select candidates who are the best fit for our clients’ needs. This approach also ensures engagement with our community of professionals on the Fintalent platform, and is a benefit both to our clients and independent professionals, as our freelancers have direct access to the roles best suited to their skills and are more likely to take an interest in a project if they have been sought out directly. In addition, if a member of our community is unavailable for a project but knows someone whose skill set perfectly fits the brief, they are able to invite them to apply for the role, utilizing the personal networks of each talent on our platform.

Which skills and expertise do your Fintalents have?

The Fintalents are hand-picked and vetted Vendor Due Diligence professionals, speak over 55 languages, and have professional experience in all geographical markets. Our Vendor Due Diligence consultants’ experience ranges from 3+ years as analysts at top investment banks and Strategy consultancies, to later career C-level executives. The average working experience is 6.9 years and 80% of all Fintalents range from 3-12 years into their careers.

Our Vendor Due Diligence consultants have experience in leading firms as well as interfacing with clients and wider corporate structures and management. What makes our Vendor Due Diligence talent pool stand out is the fact that they have technical backgrounds in over 2,900 industries.

How does the screening and onboarding of your Vendor Due Diligence talent work?

Fintalent.io is an invite-only platform and we believe in the power of referrals and a closed-loop community. Members of our community are able to invite a small number of professionals onto the platform. In addition, our team actively scouts for the best talent who have experience in investment banking or have worked at a global top management consultancy. All of our community-referred talent and scouted talent are subject to a rigorous screening process. As such, over the last 18 months totaling more than 750 hours of onboarding calls, of which only 40% have received an invite-link after the call.

What happens if I am not satisfied with my Vendor Due Diligence consultant’s work?

During your initial engagement with a member of our Fintalent talent pool with no risk. If you are not satisfied with the quality of your hire for any reason then we are able to find a replacement at short notice. There is no minimum commitment per project, but generally projects last at least 5 days and can last 12+ months.

Interested in our invite-only community of tier-1 Vendor Due Diligence experts?

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