What Is Vendor Finance?

Supplier audit means that the company's procurement department is responsible for negotiating purchase orders and contracts with external suppliers, determining the "right to audit clauses" in the contract, and ensuring that the company has the right to provide suppliers with certain conditions. The production cost of the product is audited. Through supplier audits, companies can effectively prevent the cost of raw materials purchased back from becoming too high.

Supplier audit

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Supplier audit refers to

The concept of supplier audit first appeared in the Good Manufacturing Practice (Good Manufacturing Practice,

1. Purpose of supplier audit. The main purpose of the supplier audit is to verify whether the product quotation provided by the audited supplier truly reflects the actual production cost of the company by reviewing the cost information of the audited supplier;

1. The premise of supply audit is the establishment of a right to audit clause. The prerequisite for implementing a supplier audit is that the company is

1. The purpose of the audit was changed from controlling the price risk of raw materials to controlling the overall risk of the material procurement business. As far as the current situation is concerned, the supplier audits of most enterprises are mainly to review the cost information of suppliers, that is, they are mainly concerned about the price risk of outsourced materials. However, companies face not only price risks but also other major risks in the material procurement business. For example, there are fraud or unreasonable terms in the purchase contract, the contract is not implemented as promised, the number of purchased products does not meet the requirements, and the product quality is not qualified. Enterprises should pay attention to these issues when conducting supplier audits, so as to greatly reduce various risks in the material procurement business.

2. The main body of the audit has changed from the internal audit department to the participation of all relevant departments of the enterprise. Supplier audits of existing companies are mainly performed by the company's internal audit department, but it is difficult to review situations such as whether the quality of materials meets standards with the expertise of internal audit agencies alone. Therefore, with the expansion of the supplier's audit purpose, the departments involved in the audit must also undergo corresponding changes, and an audit team should be formed by the corporate finance, audit, procurement, quality and other departments. In addition, in order to ensure the impartiality and independence of auditing, social intermediaries such as certified public accountants can be introduced to perform or participate in supplier auditing operations. It is difficult for an internal audit to find all material procurement risks, and a third-party audit can often find problems that cannot be found in an internal audit, so it can better control the risks facing the enterprise, but the audit costs have also increased.

3. Expansion of audit objects. The objects of supplier audits change with the audit objectives. The object of audit should be from the company's cost data to a comprehensive audit of the basic conditions and financial status of the supplier's production and operation, and the company's material procurement process should be fully monitored. The financial status, production process, technical level, product quality and the conclusion and execution of procurement contracts, as well as the transportation and acceptance of products, are all the objects that audits should pay attention to. For example, the purchasing behavior of many multinational companies attaches importance to service quality before purchasing costs exist. Some issues seem to be "virtual", such as the supplier's quality system, management system, innovative spirit, credit history, and even child labor. It is these "virtual" problems that imply the company's specific requirements for price, quality and technology.