How do you handle the address book for the setup of new vendors /changes. What type of documentation do you require if any?

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"Is the address book centralized in A/P and is A/P responsible for the setup and changes What exactly is your process - and what type of controls do you have in place for the address book."

 

Most companies establish and maintain what is commonly termed a Vendor Master File, which is a database of vendor companies from whom the company purchases goods and services and remits payment. The file will include the vendor's mailing address, phone number, and the vendor's tax identification number (TIN), and may include additional information about the vendor.

Accounts payable often has the responsibility of the vendor master file maintenance and set up, though in some organizations, purchasing controls it. The Purchasing department initiates the paperwork which is passed onto Accounts Payable for set up in the accounting system. This methodology splits the responsibility of the authorization to accept a new vendor vs. setting up the new vendor in the system. This can act as a preventative control to assist with avoiding fraudulent vendors from being added to the data base. If the same person who approves new vendors can also set up new vendors in the data base, then there is an opportunity to add a fraudulent vendor. Further enhancement to this control would be to make sure that in your Accounts Payable Department you are able to separate the set up of a new vendor from people who will process the invoices, who are then separate from the people who cut the disbursements.

Some companies may allow the Purchasing Department to enter new vendors to a data base. However they try to have a control in their system that requires a person independent of the Purchasing Department approve the new vendor set up prior to activation.

When adding new vendors, it is a best practice to require a completed and signed W-9 form from the vendor prior to vendor set-up. This provides you the vendor's certification of their tax ID number (TIN) and the type of organization. TAPN has a new vendor welcome letter template and new vendor form to assist you in this regard.

New vendor verification is important to ensure you are dealing with a legitimate company. Verification efforts should reflect the amount of business you do with the vendor -- no need to spend too much time on a small office-supply vendor; but greater care should be taken with major vendors. Vendor validation begins with a phone call, verification of key individuals and confirmation of the physical address. Refer to the vendor's secretary of state to verify a business license. For large vendors, get background information from such organizations as Dun & Bradstreet or Austin-Tetra.

We recommend that you read the report Managing Your Vendor File , and also see the other reports listed under TAPN's section Vendor Master File.

For help with controls, see the Internal Control Checklist in the tools section.

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