Here are 7 Tips for a Successful Master Vendor File Cleanup

Master vendor file cleanup may seem like a daunting project, but can easily be made into a controlled process. 

By making master file updates on an ongoing basis, you can avoid the pitfalls that come with incorrect entries, such as double payments, fraudulent activity and non-compliance.  With the right process in place, you are better able to use the master vendor file to help you with your overall accounts payable strategy.
Let’s take a look at a few best practices when doing a master vendor file cleanup:
  1. 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 can cost your company time and money. It’s less costly to prevent a double payment than it is to try and recover one once it’s been made. You will also be able to increase your audit recoveries by more efficient identification of questionable vendors.
  2. Not everything is a duplicate entry.  There may be multiple payment sites listed under one vendor or more than one vendor number for each shipping location. Familiarize yourself with parent and subsidiary relationships between vendors.
  3. Archive inactive vendors.   If you haven’t used a vendor in some time, it is best to remove them from your master vendor list.  If the vendor is archived, their information can be easily accessed for reinstatement. By removing inactive vendors, your list becomes leaner and records are easier to access, increasing employee productivity through reduced processing time.
  4. Obtain any missing data.  Be sure all vendor records are complete and accurate.
  5. Include department representatives. Don’t limit a file cleansing to the accounting department. By including other functional areas, you can gather insight into what type of information is needed and design your master vendor file to accommodate more than just your accounting department. 
  6. 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.
  7. Vendor portal. Think about implementing a vendor self-service portal where individual vendors can update pertinent information and find answers to relevant questions.

Cleaning and understanding your master vendor file, while establishing controls can have dramatic effects on how you’re able to conduct business, giving you more bang for the buck through cash discounts and volume rebates.  This will allow you to analyze and manage your AP spend and ultimately lead to potential renegotiation with your vendors. A streamlined and well managed vendor database helps to ensure compliance with regulations, internal controls, as well as 1099 tax legislation. The Association of Certified Fraud Examiners estimates that the average company loses 5% of its annual revenues to fraud. With clearer visibility and better controls, it’s also easier to reduce fraud through detection of questionable vendors and identification of attempts to bypass your internal controls. For those reasons alone, a master vendor file cleanup is something you should consider to be a top priority and directly related to the strategic goals of your company. The tools you put in place after the initial cleanup are as important as the cleanup itself. You’ll want to establish consistent guidelines and coding standards for vendor set up, and identify any subsidiaries or parent companies that may already exist. Most importantly, maintain the integrity of your vendor file through regularly scheduled reviews and continuous monitoring. A clean master vendor file delivers cost savings and increases productivity throughout your company by providing user friendly and accurate information.  Although this task can be time consuming, once finished, it provides a framework for future vendor management. 

Be sure to check out our free AP whitepaper for tips on how to select the right AP solution or email for the inside scoop on conducting vendor master file cleanup with our automated process.