Accounts Payable News^®

Start the Clean-Up

As a busy Accounts Payable professional, setting up and maintaining something which could truly be considered a comprehensive master vendor file is likely to be one of those things you know should be done and yet....

Often Accounts Payable departments are relatively small compared to the company size and tend to process a large volume of transactions.  In this environment it’s easy to overlook processes or to simply not have the time to adhere to them.

Getting Started

However, as with most things, the key is to get started.  The daunting task of tackling your Master Vendor File requires determination, skill and time set aside to prioritize process implementation to the forefront.  If it continues to be ignored it will move from something nagging at the back of your mind to something which can cause serious problems for the company – including fraud.

With a lax approach to master vendor files the door is thrown open to the chances of duplicate or erroneous payments.  In these increasingly compliance lead times, this can have serious consequences and with the onset of a “Sarbannes-Oxley” culture the onus for failure to effectively monitor and maintain files falls firmly on the organisations involved.

Despite the daunting nature of the task where a mismanaged system may have been in place for many years - the implementation of a new process which adheres to “best practise” recommendations – can be relatively simple as long as some key principles are followed:

Key Steps to a Clean Master Vendor File

• Restrict access to the master vendor file so that only one person (and a back-up) can set up or change vendor records
• Insist on adherence to strict guidelines on how information is input and provide guidelines on how to enter invoice numbers.  This can help to eliminate duplicate invoicing
• Build in guidelines for regular culling of inactive vendors.  If many inactive vendors are kept indefinitely they can become a breeding ground for fraudulent activity and inadvertent accounting errors.  It’s best if they are simply highlighted as inactive rather than deleting them
• Audit changes to the master vendor file – any changes should be attributed to the person who made them with a time and a date
• Validate the vendor’s address and phone number prior to vendor set up
• Remove employees from the master vendor file to prevent any compliance issues as much to protect employees as to prevent fraud.  Add them onto a separate system
• Establish a written procedure manual to cover every aspect of master vendor file maintenance.  This should be easy to access across the organisation and be jargon-free

This is by no means a conclusive list, but even if these simple steps are taken you will have embarked on the right road to a compliance friendly system which will ultimately save your company money and keep you safe from anxiety inducing probing from the auditors