Why clean your vendor master file now?
The 2020 year-end is going to be significantly different for AP teams that are now required to file not only the usual 1099-MISC forms but also 1099-NECs which cover “non-employee compensation.”
Daily online news resource CFO & Controller Alert suggests cleaning your vendor master files to avoid costly mistakes from duplicate, outdated, or inaccurate records as well as non-compliant and fraudulent activity.
You’re not alone.
According to CFO & Controller Alert, “[now] is prime time” for an organization to clean its vendor master file. The resource conducted a recent online poll that found 67 percent of Accounts Payable pros said their vendor master file “could use a little cleaning” with 19 percent admitting their file is “a total mess.”
Seven steps for a vendor master file cleanup that can save your organization up to five percent of annual revenue*:
- Remove vendor duplication. Did you know that almost 30% of all double payments are the result of duplicate vendors and vendor coding issues? Duplicate vendor entries lead to double payments which cost your company time and money. Obviously, preventing a double payment costs less than trying to recover one once it’s been made. Additionally, audit recoveries increase with more efficient identification of questionable vendors.
- Not everything is a duplicate entry. Generally speaking, vendors are unique. Unfortunately, this rule sometimes breaks down. Complications include multiple payment sites listed under one vendor or more than one vendor number for each shipping location. To cope with this, many accounting systems allow coding of parent and subsidiary relationships between vendors.
- Archive inactive vendors. When you haven’t used a vendor in some time, remove them from your active vendor list. By archiving the vendor, their information remains accessible for reinstatement. Furthermore, with inactive vendors gone, your list becomes leaner and records are easier to access. Straightaway, reduced processing time leads to improved employee productivity.
- Obtain any missing data. While this is easier said than done, ensure the completeness and accuracy of all vendor records.
- Transform your vendor file into a strategic resource. When performing master file maintenance, include other functional areas, such as purchasing or contracts management. Their different viewpoints on vendor management may have value. Codifying vendor information from their areas could turn your vendor master file into a more strategic resource for many departments.
- Automate the process. Some cleanup activities lend themselves well to automation. Automation can monitor your file by encoding company policies into a continuous monitoring solution, but you need to set the parameters.
- Vendor portal. Moving forward, consider implementing a vendor self-service portal where individual vendors can update pertinent information and find answers to relevant questions.