Every business wants value, and every vendor wants to appear like the best deal. When those two needs meet, the price becomes the headline. But in vendor relationships, especially for firms that handle sensitive financial data, maintain client confidentiality, and operate within regulatory frameworks: the real cost of a vendor is rarely the number at the bottom of the invoice.
Vendors know how to sell. Some appeal to your sense of quality: “We do a better job.” Others take the price-first approach: “We can do the same job, but cheaper.” And in either case, they usually back their claims with client testimonials, flashy brochures, or lists of supposed differentiators.
But the real test of a vendor isn’t their pitch—it’s the integrity of their operations, the quality of their internal controls, and the clarity with which they expose these controls to you. The price is only one variable. When treated as the only one, it becomes a liability.
A Lesson in Surface-Level Vetting
Consider the following story: A mid-size accounting firm, let’s call it Dewie Cheatem and Howe, CPAs LLP (DCH LLP)needed a cloud document management vendor to support its expanding audit and advisory practice. Several vendors pitched their services, all promising security, scalability, and seamless integration. One stood out: not for superior features, but because their pricing was 40% lower than the next closest competitor.
The firm’s managing partner asked the vendor why they were so cost-competitive. The answer: “We’re investing in the relationship.” It was a compelling phrase. It implied long-term partnership, mutual benefit, shared vision. But this was a one-time implementation with minimal recurring support. There was no “relationship” to invest in.
Despite internal hesitations, DCH LLP signed the deal. The platform launched smoothly. But within eight months, the problems began. First came a temporary outage that blocked client access during a key tax filing week. Then came a breach that, while minor, triggered client concern and reputational damage. Finally, a subcontractor used by the vendor was discovered to be outsourcing part of the coding work overseas—without proper data residency guarantees. What initially seemed like a bargain had now turned costly: not just in dollars, but in trust and regulatory exposure.
Beyond Price: The True Markers of a Quality Vendor
The moral is clear: when vendor management is reduced to price negotiation, you’re courting hidden risks. Instead, effective vendor evaluation requires a layered approach—one that includes both technical and contractual safeguards.
Start with security. A reputable vendor will provide attested security assurances, often in the form of SOC 2 reports. These reports don’t just list practices, they describe the control environment, management philosophy, and third-party audit results. Importantly, a SOC 2 Type II report covers how controls are implemented over time, not just described in theory.
Yet even a SOC report is not a free pass. Every report includes “user control considerations,” which spell out what your firm must do to uphold your side of the security model. If you’re not enforcing those practices—like enabling multi-factor authentication, managing user privileges, or logging system access—then the report offers little meaningful protection.
Next is the “right to audit” clause. This small but powerful addition to your vendor contracts can be a quiet enforcer of accountability. Even if your firm never exercises the right, the knowledge that an audit could occur keeps the vendor honest. It sends a message: oversight is possible. And in business, as in human behavior, people respond more reliably to what is inspected than to what is expected.
Security exhibits offer another layer of protection. These are appendices to the vendor agreement that define specific security requirements: vulnerability testing frequency, incident response timelines, data encryption standards, and staff training protocols. A good vendor will accept these terms with minimal pushbacks. A reluctant vendor—one who claims they can’t comply or finds such provisions “not standard”—is sending a clear message: they are not ready for high-integrity work.
Then there is the issue of sub-vendor management: that is, who your vendor hires or relies on behind the scenes. Many breaches and service failures stem not from the vendors themselves but from their subcontractors. These second-tier providers may lack the same controls, geographic restrictions, or even legal frameworks. Yet they may have access to your data. Effective vendor oversight means understanding not just who you’re paying, but who your vendor is paying.
The Fair Price for Quality
Only after these elements are assessed should price enter the conversation. Not before. When you compare vendors who all meet a minimum bar for transparency, control, and integrity, then price becomes a useful differentiator. At that point, you’re comparing apples to apples. The low-cost provider who cuts corners won’t survive that scrutiny, while the one offering value through legitimate efficiency will shine.
In truth, the best vendors tend not to be the cheapest. They tend to be the clearest: the ones who articulate their security architecture, document their internal control policies, comply with third-party audits, and demonstrate a commitment to ongoing improvement. These vendors may charge more—but they’re selling peace of mind, and in regulated industries, that has value.
Vendor Risk for CPA Firms
CPA firms have a special duty to vet vendors rigorously. Whether in tax, audit, advisory, or client accounting services, firms routinely handle personally identifiable information, financial data, and internal business records. Vendor mismanagement is not just an operational problem: it is a client risk, a reputational risk, and in many cases, a regulatory risk.
When CPAs select technology vendors for client bookkeeping, tax workflow, document sharing, or time tracking, they are often extending their own professional reliance. If that vendor fails, the firm’s ability to meet engagement deadlines or maintain confidentiality may be jeopardized. And in some jurisdictions, professional standards may even assign partial liability to the CPA for failing to supervise third parties.
Even for clients, CPAs should take an advisory role in vendor management. If your client is choosing a payroll provider, ERP consultant, or point-of-sale system, you can help them evaluate controls, interpret SOC reports, or negotiate contract terms that include security exhibits. This added layer of service not only protects the client—it strengthens your firm’s position as a trusted advisor.
A Hypothetical Wake-Up Call
Let’s revisit DCH LLP. After their bad experience, they conducted a vendor risk review across all functions. They discovered another vendor—this one managing client portals—had no clear disaster recovery policy. Another, which supported internal bookkeeping, had failed to perform background checks on administrative staff.
The firm implemented new policies: every vendor now had to provide current SOC 2 reports, maintain a security exhibit, and disclose all subcontractors. Price negotiations were deferred until all risk elements were satisfied. Over the next 18 months, DCH LLP reported smoother vendor relationships, fewer client complaints, and stronger overall compliance posture. The initial investment in due diligence had paid off.
Conclusion: The Cost of Doing Business in the Right Way
Vendor management isn’t about finding the lowest price—it’s about finding the right price for the right value. When done well, vendor oversight protects data, ensures continuity, and preserves your professional integrity. When done poorly, it invites disruption, reputational harm, and regulatory scrutiny.
If your firm or your client is still selecting vendors based on spreadsheets and gut feelings, now is the time to rethink the process. Ask the tough questions. Demand transparency. Be willing to walk away when the answers don’t match the price tag.
Because in the end, the real cost of a bad vendor isn’t what you paid: it’s what you failed to prevent.
Yigal M. Rechtman, CPA, CFE, CITP, CISM is the managing partner of Rechtman Consulting LLC, a forensic accounting firm. He is also the publisher of the CPA Publisher.
