Due diligence – minimising risk in new supplier relationships

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Before signing on the dotted line for any new HR software or payroll software, it is vital to ensure you are happy to do business with the supplier.

“In the current economic climate, it’s not hard to imagine that a vendor might go out of business, or might be acquired,” says Mark Pavlika, a director with HR consulting firm Principal Strategy. “Due diligence simply means checking what risks are involved in the relationship, and how you might address or minimise those risks.”

Do your research

First, research the vendor you are working with and the key executives. How long have they been in business? Do they have a sound credit rating and full accounts filed on time? Has there been any coverage in the industry press suggesting upcoming changes or problems?

Relationships

Next, consider how effectively the company manages relationships with other suppliers. Obvious potential trouble spots include legal disputes and judgments against the supplier, but you should also ask to speak to three customers in a similar industry to your own, and ask them about the quality of support and service they have received. Did their project come in on time and on budget?

Ownership

Payroll software is a major investment for any business, so consider carefully what is being paid for, particularly with hosted and managed services. What will you own? What happens if the supplier ceases offering the service? How will data be stored to ensure confidentiality?

If a software provider is not willing to let you own the underlying code in an application, and data might be lost if things go wrong, then consider asking the supplier to put this in escrow in case of financial problems.

“Ultimately, you hope never to need any of this information, but a frightening number of companies buy HR and payroll software on the basis of nothing more than a strong relationship with the sales team,” says Pavlika.

Frontier Payroll Pyramid Northgate Ceridian BondTeamSpirit Advanced
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