Vendor Management Glossary
Key terms and concepts in vendor management, third-party risk, and compliance.
A
Audit Trail
A chronological record of all actions taken within a system, including who performed each action, when, and what changed. Essential for compliance demonstration and forensic analysis.
ACH Validation
Verification of bank account details before establishing electronic payment relationships. Confirms account ownership and prevents payment diversion fraud.
C
Certificate of Insurance (COI)
A document issued by an insurance company that verifies the existence of an insurance policy and summarizes key coverage details. Typically required from vendors before engagement.
Compliance Gap
A missing or deficient element in a vendor's required documentation, certifications, or operational practices. Gaps create risk exposure until resolved.
D
Due Diligence
The investigation and evaluation process conducted before engaging a vendor. Includes identity verification, financial assessment, and risk evaluation.
E
Evidence
In vendor management, documentation that proves compliance with a requirement. Examples include insurance certificates, licenses, certifications, and validation reports.
Expiration Tracking
The systematic monitoring of time-sensitive documents and certifications to ensure continuous compliance. Includes automated alerts before expiration dates.
M
Master Service Agreement (MSA)
A contract that establishes the general terms governing all future transactions between parties. Individual work orders or statements of work operate under the MSA terms.
O
Onboarding
The process of collecting required information, documents, and approvals to qualify a new vendor for engagement. Effective onboarding establishes the foundation for vendor compliance.
Offboarding
The formal process of concluding a vendor relationship, including final payments, access revocation, document retention, and compliance record archival.
R
Requirement
A specific compliance obligation that a vendor must satisfy. Requirements may be universal (all vendors) or conditional (based on vendor type, service, or risk level).
Risk Transfer
The practice of shifting potential financial liability from one party to another, typically through insurance requirements and contractual indemnification clauses.
S
Segregation of Duties
A control mechanism requiring different individuals to authorize related transactions. Prevents fraud by ensuring no single person can create vendors and approve payments.
Status/Readiness Signal
An indicator showing a vendor's current compliance state. Common states include Compliant, Pending, Expired, and Exception.
V
Vendor Readiness
The operational state of having complete, current documentation and meeting all requirements for active engagement. A ready vendor can begin work without delays.
W
W-9 / TIN Validation
The process of verifying a vendor's tax identification number against IRS records. Prevents payment to fraudulent vendors and ensures accurate tax reporting.
Workflow Approval
A structured process requiring designated individuals to authorize actions before they take effect. Workflows can be simple (single approver) or complex (sequential or parallel approvers).
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