How to negotiate a vendor agreement

How can you make the process of negotiating vendor agreements better for both sides of the buyer/seller relationship?

Vendor agreements are some of the most commonly agreed contracts in a business - but negotiating these contracts can be a manual, time-consuming process. This deep dive explores why and how vendor agreements are typically negotiated. Use the navigation below or explore our deep dives on other contracts, like MSAs and SaaS agreements

What’s a vendor agreement? | Who do vendor agreements affect? | What’s the manual process? | How to approach vendor agreement negotiations | How to negotiate vendor agreements more easily | Useful features | Learn more

What’s a vendor agreement?

A vendor agreement sets out the terms of a transaction between a buyer and a vendor. These types of agreements exist across every industry. Whether you are a food marketplace looking to buy produce or a SaaS business looking to buy new software, the vendor agreement acts as an important touchpoint in that exchange. 

‘Vendor agreement’ is a broad term that covers all contracts sent by a supplier to a buyer. They are also referred to as ‘supplier agreements’ or ‘supply of services agreements’. 

Who do vendor agreements affect? 

Many people are involved in the vendor agreement process: 

  • The procurement team is responsible for buying the service.They negotiate the commercial terms within the contract.

  • The legal team is responsible for negotiations and redlining.

  • The finance team authorizes and keeps track of the payment.

  • The business stakeholder is the person who will use the goods or services.

What’s the manual process?

In a manual process, the vendor generates an agreement and emails it to the buying party. Unlike most contracts, this type of agreement doesn’t have a drafting process. 

Negotiation between parties can be a headache. Usually, negotiations take place over email or in phone calls, so there’s no audit trail of changes to the agreement. The back-and-forth nature of this process can cause friction between teams within a company: the business stakeholder wants to confirm the purchase so they can start using the product or service, and can see their legal counterparts as a blocker to this. 

Eventually, when both parties are satisfied, the contract is signed – either with a wet signature or using an eSignature provider.Copies of the agreement are emailed to each stakeholder and stored on personal desktops or in shared drives.

A big variable to negotiation is the power dynamic. If the vendor is a large, well-established business, it can be challenging for smaller businesses to negotiate terms

How to approach vendor agreement negotiations

Contract negotiation is a spectrum, with minimal to low negotiation at one end and extremely heavy negotiation at the other. Although vendor agreements tend to sit towards the low side of this spectrum, the degree to which a vendor agreement is negotiated depends on several factors. These include the purchase value and quantity, the companies involved in the transaction, the type of goods or services being sold, and the skill of the negotiating party.

Another significant variable is the power dynamic between the buyer and the vendor. If the vendor is a large, well-established business, it can be challenging for smaller businesses to negotiate terms. Contract also comes into this: at certain price levels, companies may not allow negotiation as the cost of negotiating terms on a low-value deal may be higher than the payment itself!

The following terms and clauses are some of those most commonly queried or negotiated:

  • Termination rights

  • Service levels

  • Reporting obligations

  • Auto-renewal 

  • Financial elements (such as interest and exchange rates)

  • Use of IP (logos on the vendor website, for example)

  • Data use (aggregation and anonymization)

  • Data removal when the service ends

The legal team is usually responsible for negotiating these terms.

If teams live in other systems, why force them to use a new platform? A solution with two-way real-time data sync will give teams the confidence to negotiate and manage their contracts

How to negotiate vendor agreements more easily

Find one system that does it all

Vendor agreements are usually created, agreed and managed across multiple systems – typically email, Word, shared drives and an eSignature tool such as DocuSign. This can lead to greater risk: changes made in one system or version may not be reflected in another, meaning teams may not have up-to-date and reliable information. A contract collaboration platform that allows for in-browser negotiation is far safer and more efficient. 

Define your fallback positions

Playbooks are a useful way to define the terms you’re willing to accept in a vendor agreement. These playbooks need to be robust and easily accessible so the legal team can empower the procurement team to negotiate without minimal day-to-day involvement from them. This will streamline the process and reduce friction between teams.

Use two-way, real-time data sync

If different teams involved in the contract process live in other systems, why force them to use a new platform? A solution with two-way integration and real-time data sync will give teams the confidence to negotiate and manage their vendor agreements from the comfort of the platforms they know best.

Negotiate your vendor agreements in-browser, in real time. Try Juro today.

Useful features

If you want to streamline the negotiation process for your vendor agreements, find a solution with the following features:

  • Internal and external commenting, which allow parties to collaborate and negotiate in-browser, in a single version of the agreement. This helps teams reduce friction and close deals faster.

  • Visual timeline and audit trail, which offers a full overview of activity in the contract, and allows you to see whether counterparties have viewed the agreement.

  • Audit history, so you can compare different versions and keep track of edits.

  • Full OCR text search, because searching for lengthy agreements can be a time drain. This feature will help you locate documents and key terms quickly.

  • Renewal reminders, so you never miss a deadline again – particularly useful if key dates were changed during negotiation.

  • Slack and email integrations, so parties can be notified and updated as negotiations take place.

Supercharge your contract workflow with all these features, and enable your business to collaborate better on vendor agreements. Everyone wins. 

Is negotiating vendor agreements a pain point for your business? If so, try Juro and discover a contract collaboration platform that simplifies negotiations, reduces time-to-sign and helps teams manage contracts in a unified workspace.

 

 

Topics: Vendor agreement

Download the guide