Vendor due diligence

Customer due diligence is critical for any business transaction, having a vendor due diligence process before agreeing to work with a new vendor is crucial for business success.

While forming vendor due diligence checklists, businesses typically contract with a third party company such as iTrust. They must have a great deal of experience in auditing companies’ practices and be neutral to the potential business relationship.

Further, having a vendor due diligence report helps many business areas. Potential customers would like to be sure that you have a solid supply chain and stable processes across the board. Additionally, potential buyers or investors will be more likely to have faith in you as a developing company if you will be able to produce such a type of report.

5 Effective Vendor Due Diligence Best Practices

Create a Preliminary Report

Before anything else, your business should invest in making an essential profile of the business with whom you’re planning on having a relationship. This profile should contain information about the business, what’s publicly known, and other information. Other portions of your due diligence can be based on this.

Assess Formal Compliance

All domains of business have some sort of compliance standards. Some, like PCI DSS, are legally optional, while others are not. Most above-board companies will advertise that they operate in compliance with these standards; ensure this is the case.

Have a Standard Set of Interview Questions

As your business grows, your list of contacts likely will, as well. This will require the generation of more of these reports. To save time and make your business practices standard across the board, consider making a list of questions that will be asked of every vendor in your supply chain.

Implement a Continuous Monitoring Approach

Vendors’ levels of quality can vary greatly over time. Your company should have a method of periodically re-evaluating vendor relationships to ensure that your initial assessments still stand.

Make a Breach and Continuity Plan

Your business needs to be prepared for a potential data breach. That will help you strategize in advance so that you have a way to continue to operate in future hardships, increasing the overall value of your business.


The vendor due diligence process may seem obvious, but many businesses skip over it for a variety of reasons. It’s also an expense that accounting departments often try to dodge. However, having a vendor due diligence report will likely end up being invaluable for your company.

Some of the processes can be performed by internal personnel, such as building up a profile of the vendor with whom you’re considering working. However, some components, such as formal audits, must be done by professionals. This will help instill confidence in your company and demonstrate to potential partners that you’re willing to invest in their experience and peace of mind.

Professionals can also simply consult with your company and help you create your vendor due diligence checklist. For companies handling less sensitive information, this could be all that’s required. However, in the digital age, there are few cases where a professionally performed audit isn’t necessary.