Vendor Master File – Best Practices
Your organization has grown over the years and so has your vendor master file. While many administrative chores don’t directly contribute toward your bottom line, maintaining a clean, up-to-date vendor master file is not one of them. Neglecting this aspect of your business can affect everything from issuing duplicate payments to non-compliance with IRS regulations, which will ultimately hurt your credit rating.
In the long run, you could also be missing out on special discount terms available to your company.
Here are a few tips:
- Establish a written procedure for adding vendors into your accounts payable (AP) system. Each record should include the person or department responsible, the data that will be collected from the vendor and a written agreement of the payment terms.
- Organize vendors into separate folders based on their business. Corporations, sole proprietorships and government agencies should have their own sections within your master file. You don’t want to be sending incomplete or incorrect 1099’s to the federal government or another internal house account.
- Categorize past and future payments on a month-to-month basis. Your staff may spend hours trying to get to the bottom of Inaccurate deposits or disbursements. Know the differences between payment types and when they should be applied.
- Apply standard rules for names and addresses. The IRS will use a combination of the TIN (Taxpayer Identification Number) and the name of the business for confirmation, so it’s important to get it right. Many IRS penalties are caused by reporting the correct TIN, but not entering the business’ registered name that corresponds to its TIN.
- Ask for a W-9 from every vendor well before any payment is issued. This may seem simple, but many AP departments neglect to do this and have a difficult task to deal with at the end of the year.