know your suppliers

3 min

Know Your Suppliers (KYS): A Guide For business leaders

There are an increasing number of issues that arise from the supply chain that can negatively impact business operations. Business leaders should always know who their suppliers are, so in this article we'll look at why businesses must follow KYS for successful supply chain management in the future.

Alice Bled

Alice BLED • Libeo

Published on | Updated on

What is a KYS program?

Know your supplier: definition

Know your supplier (KYS), also known as know your vendor, is a program followed by many businesses. The main motivation behind it is to ensure that the quality and quantity of products purchased from suppliers are in line with requirements. This process has been implemented by companies all over the world, and it helps to increase productivity and bring down business costs.

The KYS program has four main components:

  • Know your supply chain partners — Business leaders should know who their suppliers are and have an understanding of their business model, culture and values.
  • Know what you buy — Business leaders should understand the products used in their supply chain and the impact it has on society, the environment and human rights.
  • Know what's happening in your supply chain — Business leaders must be able to track all transactions made between them and their suppliers, as well as monitor issues that arise during these transactions, such as accidents or injuries at work sites or environmental damage caused by pesticide used by farmers.
  • Know how Libeo can help — Business leaders should seek out assistance from experts who can help them run a successful KYS program within their company.



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Why have a KYS program?

How well do you know your suppliers?

The KYS program is designed to protect both the supplier and the buyer from fraudulent activities. When a business knows who they are dealing with, they can make better decisions regarding their interaction with that person or company.

It also helps businesses avoid financial loss caused by bad debtors. When businesses don't know who they are doing business with, they can't prevent their customers from avoiding paying bills or stealing their products.

A KYS program will allow you to:

The equivalent exists between a company and its customers. This is known as Know Your Customer (KYC). Widely used in the banking sector, the KYC process enables the collection and updating of customer data to ensure compliance with obligations and combat money laundering, fraud, tax evasion and the financing of terrorism. These two procedures, KYS and KYC, help manage third-party risks.

How to assess your risk

It's good practice for any business to conduct an initial assessment of all new clients before signing a contract. This will help them understand what kind of business they are dealing with and whether they are likely to be involved in any illegal activities or transactions that could harm their finances, as well as their reputation.

In the sourcing phase, start by creating an enquiry form to send to your potential suppliers. Whether you buy directly from the supplier or from their subcontractors, follow these steps to ensure you get the best possible value for money.

Know your supplier: checklist

  1. Research your supplier — Before ordering goods, make sure you have researched the supplier. Where are the goods made? What standards do they meet? Are they certified as safe products? What materials have been used to make them? Can you visit the manufacturing facilities? Are there any online reviews of the company or its products?
  2. Place orders with several suppliers — Place small orders with each new supplier first to test their quality of service and compare prices before placing larger orders. If possible, try to place small orders with several suppliers to see who offers the best service over a certain period.
  3. Check product quality — Upon delivery, what condition do the goods arrive in? What is the loss rate? Does the order live up to your expectations of quantity, freshness, packaging, etc.
  4. Check payment terms — Does the supplier accept advance payments? Is the supplier flexible on payment terms? What is their position on paperless invoicing?

Managing your risk

Managing supplier invoice payments is a big deal, especially in SMBs. Although the dematerialisation process can significantly reduce the risk of falsification, companies still face risks. Thus, it's crucial to know your suppliers and to have a good relationship with them.

KYS is an essential step towards supplier management and risk mitigation. By eliminating the need to print physical documents, Libeo reduces the associated security risks. In addition, Libeo matches bank details to invoices and flags when details change — and need reviewing — to further reduce your level of risk. Simply click the button below to see for yourself.

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