Ways credit unions and community banks are wasting money
Credit unions and community banks waste millions of dollars every year. The easiest, fastest way to stop wasting your money is your vendor management program.
As a part of this series, Maple Street’s pros explore ways your institution could be wasting money and what you can do to fix the problem.
Wasting money mistake #302: When employees negotiate contracts on their own
“Maverick” may sound cool – after all, there’s a western hero named Maverick. So why not be a maverick, buck the system, and prove you’re a strong individual who doesn’t follow the herd?
Well, that might be true in your personal life, but maverick contracting can cost your credit union big money. When an employee decides to independently negotiate or, more likely, renew a contract on his or her own without informing others, trouble begins. This is a quick way to lose money. We’ve seen it over and over again.
For example: Bob just negotiated a contract with a new vendor to buy the “new, shiny object” at a great price and replace another vendor. However, Bob didn’t know someone else signed an amendment to renew a contract with the current vendor. Whoops. Now there are two vendors for the same service, so the institution is now up that well-known creek without a paddle and faces paying double what it should. It’s gonna hurt.
As much as we’d like to say this is a hypothetical situation, this is actually a true story. Over and over again.
One of our clients had a vendor contract in our contract management system. They noted the renewal dates and terms and used that to make their plans for changing vendors to a new, better system. The dates and terms were correct. They went through a selection process, planned implementation and signed a contract with the new vendor.
Here’s the problem: Someone else at the credit union signed an amendment with the original vendor that extended the contract by three years and didn’t inform anyone of the amendment to upload and adjust the dates. This maverick didn’t follow procedures. Sending the contract amendment to upload to the system and adjust the dates would have avoided this whole problem.
The signer didn’t remember the amendment when they discussed the new vendor, and neither did anyone else, because the employee signed the amendment on his own. The maverick cost the institution over $200,000. Money wasted.
They asked for our help and we got the total cost down, but there was still a substantial penalty to pay – money wasted.
How to fix this money-wasting mistake
Following vendor management procedures and having a vendor plan that everyone understands and follows would’ve prevented the amendment from being forgotten. That’s part of a good vendor management program.
At Maple Street, our professionals work with you to incorporate supply chain management principles to manage vendor lifecycles rather than a silo approach that is more likely to create mavericks. And we ensure everyone on your team understands the institution’s vendor management plan and procedures.
Does your vendor management program provide an understanding of vendors and how they interact through all departments or does the left hand not know what the right hand is doing?
Maple Street’s Vendor Advantage System®
Our exclusive Vendor Advantage System® goes beyond the vendor management paper chase with a proven, real-world process that includes educating employees in understanding the roles of and interactions between vendors. Maple Street professionals work with team members to ensure they enter needed data, reducing the risk of maverick negotiators.
The Vendor Advantage System® will:
- Deliver a complete vendor management program
- Incorporate supply chain management principles
- Manage vendor lifecycles
This results in reduced expenses, improved vendor performance and managed risk. With our system, you’ll save more than you spend and you’ll pass your vendor management exam, guaranteed.
To date, we have saved our clients $207 million. If you’d like to stop wasting money with maverick negotiators, give us a call at 800-513-6839 or email firstname.lastname@example.org. Visit www.maplestreet.com/learn to learn more.