Time to Clean Your Vendor Master File - 3 Tips

Actually it's been time since I recommend cleaning your vendor master file monthly, quarterly, semi-annually or at the very least annually. No matter which schedule you're on - October is prime-time.

Why is October prime time?

Especially if your company is a US entity, if you start now, you have time to re-validate the IRS TIN Match for example, and follow-up with vendors whose validations fail before it's time to file reportable vendors with the IRS. You will reduce the risk of fines and penalties because the legal name + tax id combination is not correct.

Plus, it's always great to have accurate vendor data to avoid fraud, all regulatory fines and the risks that come with bad vendor data.

Since I've already talked about the IRS TIN Match, here are three other tips of what to include when you clean your vendor master file.

1st Tip: Re-Validate Vendors Against Watchlists

If your company is a US Entity for example, paying a vendor that is on one of the US Department of Treasury's Office of Foreign Asset & Control consolidated watchlists can mean both civil and criminal penalties.

Watchlists and exclusion lists are not static, they can change from when you originally onboarded your vendor. Re-checking your vendor's legal name (and in some cases their tax id) against watchlists and exclusion lists allow you to find those vendors that were subsequently added to a watchlist since they were onboarded or checked last.

Need a Resource? Download my free Vendor Validation Reference List with Resource Links and check watchlist links that may be applicable to your company.

2nd Tip: Validate Your Vendor Addresses

You definitely don't want 1099's or 1042's that you send out coming back! Make sure the address is mailable and that the status of the address is not vacant or inactive.

Need a resource? Download my free Vendor Validation Reference List with Resource Links and check for the address resource that is not USPS!

3rd Tip: Inactivate/Deactivate Vendors With No Activity

If your company has not done business with a vendor in 15, 18, or 24 months (or whatever threshold works for your company) that vendor information can be considered stale.

What activity should you use to determine if a vendor is inactive? My recommendation is to review a combination of the following:

• Purchase Order Activity - When was the last purchase order closed? Do they have open purchase orders? If they have open purchase orders, they need to remain active.
• Invoice Activity - When was the last invoice? Do they have pending invoices? If they have pending invoices, they need to remain active.
• Payment Activity - When is the last successful payment with the remittance details on file?
• Vendor Record Activity - Did they recently update their information for an upcoming Purchase Order or Invoice? If so, their data is no longer stale.

Vendors who are considered inactive, should be inactivated/deactivated as a trigger to collect updated information to reactivate the file if your company wants to use them again in the future. You can use the same vendor record as long as the tax id has not changed.

This task can also be considered fraud prevention because less active vendors means their are less active vendor records available for internal or external fraud.

Want More Tips?

Attend the free 20 Tips in 20 Minutes: Cleaning Your Vendor Master File & Keeping it Clean webinar on October 18, 2023 from 1-1:30pm ET.

Sponsored by Financial Operations Networks (FON) here is what you'll discover:

• 5 Tips:? Vendor Master File Clean-Up Strategy
• 3 Tips:? Using Your Accounting System/ERP
• 8 Tips:? Steps to Clean Your Vendor Master File
• 4 Tips:? Keep Your Vendor Master File Clean

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