Tales from an Audit: Findings for Management of the Vendor Master File and Best Practices to Avoid

Keeping a vendor master file up to date with accurate and reliable information affects every part of the business, from accounts payable to sales and human resources. These best practices will help your business establish and maintain a usable vendor master file. The security and accuracy of your vendor data directly affect the relationships you have with them and the deals Debt to Asset Ratio you make with them. Vendor data includes contact names, banking information and tax identification numbers — sensitive information that must be secured for regulatory compliance. I didn’t list AP Certifications because the initial goal is to be able to function within your company and the new team member needed to be trained on your processes. However, having a training plan for continued development so that your new employee can enhance their skill set is critical.

Automated Data Extraction

• This is particularly important today, given the rapid rise of self-service vendor portals.
• Strategic Audit Solutions, Inc. is a leading Accounts Payable Recovery Audit firm specializing in duplicate payment detection and prevention.
• The emergence of new frauds, the increased realization that internal controls really do matter and increased regulatory compliance requirements have all shined a light on less-than-stellar master vendor file practices.
• For more tips on managing your vendor master file, be sure to check out the free training “Eight Steps to Clean Your Vendor Master File,” where you can access bulk upload resources to streamline some of these tasks.
• Beginning with a broader classification allows your company to gradually pare down to the time frame best suited to your internal processes.
• Your naming convention should establish a common standard for systematically punctuating and spelling such names.
• Clear policies and procedures are vital for maintaining consistency in managing vendor master files.

One area we frequently see neglected is the vendor master file — a database used to capture pertinent supplier data and to pay vendors for products and services. Without strong controls and an established review process, the vendor master file can be easily exploited. Learn more about Knowledge Exchange User Edition and how it’s helping accounts payable departments from all industries reduce vendor master file errors. If you are an AP team member for a telecommunications, energy or utility company, the largest volume of one-time vendor activity is probably due to customer refunds that are paid through AP. Some companies will utilize 3rd party companies to process the refunds, others handle them in-house, and all require a vendor record. Strategic Audit Solutions, Inc. is a leading Accounts Payable Recovery Audit firm specializing in duplicate payment detection and prevention.

Card payments

Execution of each of these steps will deactivate old vendors and validate and verify current vendors, providing greater peace of mind regarding security and regulatory compliance. Governments use vendor master files to issue purchase orders to vendors and pay invoices. Like the payroll master file, it contains a set of names and addresses for payees.

Establishing a Vendor Review Cadence

• Implement a schedule for periodic audits and use their findings to continuously enhance your vendor master file management practices.
• You may have already removed some of the supplier duplications in your vendor management system while you were removing dormant accounts, but duplicate entries could still be slipping through.
• There is no doubt that a clean record of vendors is essential to reduce unwanted costs and improve the bottom line.
• When departments work together, the organization can more effectively enforce vendor policies, resolve issues promptly, and identify process improvements.

This process not only enhances data accuracy but also reduces system inefficiencies. In this step, you want to validate foreign tax registration numbers for vendors in other countries. You might need to collect non-US tax registration numbers for teams outside vendor maintenance or accounts payable since they may use them to reclaim taxes paid on invoices. Validate other countries based on the applicable tax business or individual registration number valid for that vendor’s country. Automated Clearing House (ACH) and other types of payment fraud are on the rise, and bad actors are using vendor master files to do it. It starts with a simple request to change a vendor’s contact information, payment address or banking details, and ends it with thousands or even millions of dollars in public funds being redirected to fraudulent accounts.

• As fraud techniques evolve and supply chain ecosystems grow more complex, traditional vendor management practices must be expanded and reinforced with new approaches.
• If you want to start a business with an old supplier again, you can activate their profile but start with fresh data.
• That single database can aid both accounts and purchase departments fetch and managing suppliers’ information easily.
• You remember how exciting and satisfying it is when that big vendor packet you received hardcopy or via email has all the information you require to process that new vendor add or existing vendor change?
• Educate your team on these guidelines to ensure consistency and accuracy in data collection.
• To ensure accountability and consistency, organizations must document their vendor verification procedures.

To get and sustain optimal results, you really need to apply vendor master data management best practices. This guide discusses the top three best practices for vendor data management that every company should heed. Depending on your sales cycles and company or regulatory data storage requirements, you’ll want to archive inactive vendors to a secure long-term storage location. vendor master file best practices If last interaction isn’t currently a property updated in the vendor file, consider adding that to your vendor master file.

Ensure compliance

Effective review cadences foster open communication and offer an opportunity to address challenges proactively. If you have specific technical accounting questions, please submit them using our HelpDesk in the client portal. By defining these tailored criteria, you can select a vendor who not only meets your standards but also aligns with your company’s vision for innovation and excellence. Contact SAS to learn more about Accounts Payable Recovery Audits, Vendor Master Cleansing, and mitigating risks.

• The cost for not employing the first one could run to the millions so if you haven’t already incorporated it into your processes, you should do so without delay.
• This step may include verifying if the vendor has the appropriate certifications, such as ISO or SOC, or ensuring that the vendor complies with environmental or social responsibility requirements.
• Play a hold on the vendor record in your Accounting System/ERP to ensure that no payments will be made.
• They provide an objective assessment of the health of your vendor master file and are critical to maintain data integrity and safeguard your business interests.
• Get smarter about removing phonetic or ‘fuzzy’ matches by using software created to save your file from clutter and your time from being wasted.

In the last five years, the energy giant has acquired eleven new businesses, so as you can imagine, master vendor data management became quite the task for their Accounts Payable team. Jeff Santos, Accounts Payable Analyst at Energy Transfer shares how Xelix’s automated solution for master vendor cleansing has helped the team gain back control over their ever-growing vendor database. The third vendor master data management best practice is consistently training your staff and vendors to get optimal use value from your VMM. Constant upskilling is necessary, especially after a VMM feature update or an extensive vendor data cleanup. Training keeps all users normal balance proficient with VMM, thereby eliminating or limiting errors of commission or omission.

Using artificial intelligence and machine learning, IBIS merges data from multiple sources into a single-view database. Our own analysts use this technology during recovery audits, along with human discovery, to analyze each supplier and transaction to determine which suppliers need attention. Get smarter about removing phonetic or ‘fuzzy’ matches by using software created to save your file from clutter and your time from being wasted. Once you’ve separated the duplicate entries, remove them for good to keep your file manageable. The Vendor Master File contains data for reporting that can be relevant to other departments including Sourcing/Procurement. Inactivating the vendor means that the vendor will go through the new vendor setup process and the W-9 should be collected as part of the new vendor setup process.