Finance News & Insights

Is your master vendor file up to snuff? Find out here

Coming out on the other side of 1099 time, you know how critical it is to have complete and correct information in your master vendor file. Otherwise you could have a real nightmare on your hands.

But it’s not just important at year-end: Having accurate and carefully checked data can prevent everything from duplicate payments to fraud all year round.

So just how clean is this mission-critical system in your own A/P department?

Take a look at where most master vendor file errors lie, as well the best practices to keep only clean, consistent data from getting entered.

Where they’re coming up short

A great way to tell whether you have any possible vulnerability is to see where your peers tend to falter on their master vendor file maintenance.

According to a recent presentation on the topic, here are the troubles many companies of all sizes encounter:

  • missing or invalid taxpayer ID numbers (TINs)
  • missing or incorrect 1099 categories
  • names inconsistent with tax IDs
  • missing or incorrect contact info
  • clogged with one-time-only vendors (some estimates put the percentage as high as 65%).

If you have some of these issues you probably noticed them very recently as your department worked to get those 1099s out the door.

But even if you escaped incident-free, now’s the perfect time to double-check that you have strong policies and procedures surrounding your master vendor file.

Set up for success (and less stress)

Be certain your staffers are embracing these master vendor file management best practices:

  1. Limit who can add. Make sure you have a specific staffer with the authority to add vendors to the system. When everyone’s tight on time the temptation can be to let anyone who’s free handle the task. But for controls’ sake, this is best left to a single person.
  2. But let someone else take a look now and then. Of course you don’t want that to be the only person to ever access the system. It’s critical that for at least one billing cycle a year you have another person take over the task. It’s also smart for you to go in and take a look periodically.
  3. Have a clear and consistent entry policy. Periods between initials? Spell out Inc. and Co.? You want a formal written policy that addresses all of these possible permutations that can lead to duplicate entries. Picking the “right” format isn’t nearly as crucial as making entries consistent.
  4. De-activate one-time vendors. Considering that as much as two-thirds of your master vendor file may be filled with vendors you won’t ever use again, that’s a massive fraud exposure (a scammer may try to put phony purchases through on those accounts). De-activating these vendors are your company’s best bet – you won’t have to re-enter all their info if you tap them again but they’re not floating around with your regular suppliers.
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