Why clean your vendor master file now?
On top of pandemic-related challenges, AP teams are now required to file 1099-NECs for “non-employee compensation.” That’s in addition the standard 1099-MISC forms.
Cleaning your master vendor files before year-end helps avoid costly mistakes from duplicate, outdated, or inaccurate records. Also, this clean-up helps AP teams spot non-compliant and fraudulent activity.
You’re not alone.
According to a recent online poll conducted by CFO & Controller Alert, 67 percent of AP pros said their vendor master file “could use a little cleaning.” Nearly 20 percent admitted that their vendor master file is “a total mess.”
7 Easy Tips To Clean Your Vendor Master File
Remove vendor duplication.
Almost 30% of double payments especially come from duplicate vendor entries and coding issues. Consequently, that means you’re paying people twice! Finding these errors before making a double payment is a lot less expensive than trying to get your money back. Also, audit recoveries increase when you clean up your vendor entries.
Not everything is a duplicate entry.
Sometimes, there are surprisingly multiple payment sites listed under one vendor. Or, there can be more than one vendor number for each shipping location. For example, coding parent and “child” relationships between vendors can help avoid duplicate payments.
Archive inactive vendors.
For instance, just like clothing you haven’t worn in a year, clean out! Specifically, remove vendors you haven’t worked with in the past 12 months from your active vendor list. Then, archive their information so it’s easy to add them back to the active list when needed. Also, thinning out your vendor list means fewer records and easier and faster access.
Obtain any missing data.
Make sure that every vendor record is accurate and complete. For instance, no missing addresses or phone numbers.
Turn your vendor master file into a strategic resource.
When cleaning your files, include other teams like purchasing or contracts management. In addition, getting a new perspective may help turn your vendor master file into a strategic resource for many departments.
Automate the process.
Automation can monitor your file while encoding company policies into a continuous monitoring solution. In fact, you set the rules and you can’t afford errors.
Overall think about building a vendor self-service portal. So that individual vendors can update pertinent information and find answers to relevant questions.
The Association of Certified Fraud Examiners estimates that the average company loses 5% of its annual revenues to fraud.