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AP Vendor Master File Clean-up

Jerry jorgensen's Profile

Our company makes a number of small infrequent purchases from a large number of vendors. As a result, the vendor master file is quite large, but purchases have not been made from a number of vendors for an extended period of time. How long should a vendor remain active on the vendor master file if there has been no recent activity? With our accounting system, I can make a vendor inactive, which stops PO's from being written and payments from being made, but the vendor information remains. Thoughts and comments appreciated.

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

I would review vendors every six months. Sounds like over-kill, but after the initial clean-up, it should not be a large task. If there are no transactions, inactivate them. When things are left open, with no close oversight, there is a high probability of errors. If there is no issue activating, inactivating should be fine.

The real question that should be looked at is, “Why so many vendors?” When purchasing is fragmented, you are open to pricing inefficiency and you lose the ability to gain some pricing power. You also lose the ability of developing a relationship with a provider that is working on your behalf.

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

I agree with Regis' point. Having them out there only increases the chance of error so I would regularly clean them out.

John Pustell
Title: VP and Controller
Company: TRI Ventures Inc (formerly known as Aque..
(VP and Controller, TRI Ventures Inc (formerly known as Aquent Inc)) |

I agree with the others - and suggest you may want to issue P-Cards to your employees making these small purchases. This streamlines your vendor file, enhances your cash flow and might even get you a rebate from the bank doing your Pcard program. Many banks offer them. I've looked at Wells Fargo, Bank of America and Commerce Bank. I was no so impressed with BOA but Wells and Commerce both look good.

Ryan Scafidi
Title: Director, Financial Planning
Company: Boston Red Sox
(Director, Financial Planning, Boston Red Sox) |

Because of the fact that a lot of our buying is seasonal, we normally flush them out once a year (For those vendors with no activity for over 12 months). That said, we review mid year and assign "candidates" the one-time vendor status (feature in Dynamics GP) then at year end, we review the list and flush them as part of the year end routine when closing AP.

Lynn Fountain
Title: MBA CGMA CRMA, Past Chief Audit Executiv..
Company: Business Consultant
LinkedIn Profile
(MBA CGMA CRMA, Past Chief Audit Executive, Business Consultant) |

I agree with the statements about regular cleaning of the vendor master file. It is a recommended fraud preventative measure. As a side note, I worked for a company in the internal audit group and one of our audits found the company had never cleansed their master file and it have over 70,000 vendors many with inaccurate addresses and no FIN. The company had never allowed an audit of AP in their 60 year history. When we cited the issue and talked to management, their response was "so what" show us where that resulted in false payments. Although we attempted to explain the issue of control gap and opportunity, they were a Non-public company and convinced the Board it was not an issue.

Ashley Collins
Title: Director
Company: 3D Procurement Solutions
LinkedIn Profile
(Director, 3D Procurement Solutions) |

As a procurement practitioner I would work in conjunction with finance to cleanse the vendor master file on annual basis. In terms of removing inactive vendors I would recommend their removal in the event there was no activity throughout the financial year period.
The 'tail' as it is commonly referred to by procurement is a costly burden to many enterprises. With ~80% of transactions representing ~20% of vendor spend organisations should be looking at more efficient & effective ways with which to manage their 'one-off' type transactions. For example the Purchasing Card is a very effective tool to achieve 'tail' reduction whilst maintaining compliance to policy and transaction visibility.

Anonymous
(AAII) |

I work for a municipality and we have many one time transactions. Our employees do have purchase cards but when using a purchase card, we have to account for everything once a month thru a JE. Everything is based on our account code so the "vendor" does not appear on our vendor records. It doesn't make our vendor list smaller but it is a pain when trying to run a report on a specific vendor because some have been paid by check or purchase card. I run a report every 3 years and make a vendor inactive if we have not done business with them in 3 years. That works in our situation.

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