Getting a new vendor to work-ready status involves tax, insurance, licensing, contracting, payment, and operational decisions. Missing evidence can delay approval or make a later dispute harder to resolve.
This checklist covers every step, in the order they typically need to happen.
Before You Invite the Vendor
Before you send a single link or email, define what you actually need from this vendor.
- Determine vendor type. Independent contractor, LLC, corporation, or foreign entity? Tax forms and other requirements depend on the payee, payment, work, and jurisdiction.
- Identify required documents. Depending on the relationship, this may include the appropriate IRS tax form, insurance evidence, licenses required for the work, and a signed agreement.
- Set minimum insurance requirements. Define required coverage types (general liability, professional liability, workers comp) and minimum limits before you ask the vendor to provide a COI.
- Create or assign the onboarding group. Group vendors by type so the right requirements are applied automatically.
Documents to Collect
W-9
Use Form W-9 to request the TIN and federal tax certifications of a U.S. payee when you need them for information reporting. For payments made in 2026, the Form 1099-NEC reporting threshold for nonemployee compensation is $2,000; other forms and exceptions have different rules. Collect tax documentation before the first reportable payment when practicable. Our W-9 collection guide covers the current rules.
What to verify: legal name matches what they do business as, TIN is present and correctly formatted, entity type is selected, signature and date are present.
Certificate of Insurance (COI)
Consider requiring insurance evidence when the work creates risks your contract and risk advisers say should be insured. The needed policies, limits, and endorsements depend on the work, contract, state law, and insurance program. For a full walkthrough, see our guide to collecting certificates of insurance.
What to verify: your company is listed as a certificate holder, coverage types match your requirements, coverage limits meet your minimums, effective dates cover the expected work period, and the insured name matches the vendor entity.
Professional or Business License
Required when the work and jurisdiction call for a license or permit. See our professional license verification guide for a verification workflow.
What to verify: license is active (not expired or suspended), license number matches public records, and the license covers the specific work being performed.
Contract or Service Agreement
Have the agreement signed before work begins. Under the federal E-SIGN Act, a contract or signature generally may not be denied legal effect solely because it is electronic, but applicable contract law, consent, attribution, and record-retention requirements still matter. Capture the signer, timestamp, and signed version.
ACH Authorization
If you pay vendors by ACH credit, obtain documented payment instructions and follow your financial institution's ACH origination agreement and change-verification controls. Do not assume consumer-debit authorization rules apply to a business-to-business credit. Our ACH vendor-payment guide explains the distinction.
Tax Exemption Certificate
If you are the seller in a taxable transaction and the purchaser claims a sales-tax exemption, collect the documentation required by the relevant state before treating the sale as exempt.
System Setup Steps
Once documents are collected and verified:
- Enter vendor into your payment system (AP, payroll, or ERP)
- Set the vendor's eligibility status to "cleared to pay"
- Set expiration reminders for COI, licenses, and any time-limited documents
- Assign the vendor to the correct team or project in your project management system
- Record the onboarding completion date
Common Mistakes to Avoid
Treating a COI as the policy. A certificate summarizes policy information; it does not create coverage. Check the policy period, required endorsements, and current status with the producer or insurer when appropriate.
Setting insurance rules by vendor size alone. Base requirements on the work, potential loss, contract, jurisdiction, and advice from qualified insurance and legal professionals.
Collecting documents but not reviewing them. Define the fields and evidence your process checks, and use IRS TIN Matching only if your organization is eligible to participate.
Onboarding without a documented agreement. Oral and email exchanges can sometimes form contracts, but a signed agreement is much easier to administer and prove.
Not tracking expirations. A compliant vendor today can become non-compliant in three months when their COI renews at lower coverage. Expiration tracking is not optional.
How to Keep This Process Consistent
The most common failure mode is not the first onboarding. It is the fifteenth. When the process lives in someone's head, it degrades with every new hire and every busy quarter.
Document the process. Assign ownership. Use a system that enforces the checklist rather than relying on memory.
A vendor compliance platform like OnComply can automate collection, configured validation, and tracking while routing exceptions and approvals to the responsible people. See current pricing.