I would like to know what best practices are for a few scenarios regarding vendor setup:


Q. (cont'd)

1. The invoice has a separate remit-to address from the header address. What does best practice suggest we use? Does it matter what address is used if payment is issued electronically?

2. What is the best practice to follow: pay the name listed on the PO or the name listed on the invoice?

3. A PO vendor has outsourced their AR so payments are to be issued to another company. Who should the remit to-vendor be: the contracted vendor according to the PO, or the name listed on the invoice as the remit-to name?


Thank you for your question to Ask the Expert. Ideally a vendor master has fields for both a main company address and separate remit-to address. When there are limitations in the vendor master file, it is best to enter the remit-to address – that is where the vendor is telling you to send payment and it will prevent delay in the payment being posted to the account; the company address on the PO may be in another location entirely, even in a different country.

With regard to electronic payments, it is still best practice to put the remit-to address – just in case.

As far as your question regarding the name on the PO vs. that on the invoice, best practice is to pay the remit to name/address on the invoice. We are not certain whether in reference to the “name listed on the PO” you mean the company name or an individual, but remember the company name on the PO is who you have the contract with, not the person.  They are acting on behalf of the company. We would never use the individual name in the top line because that person could cash the check fraudulently but legally if you made the check out to them. Many companies will put a name in the attention line, but we don't like that practice. As people change positions or leave the company, it puts a burden on the VM requiring updates to the file, or payments will be misdirected because the file was not updated. If you must have an attention line, use the contact’s title and department, not their name. Best practice: avoid personal names altogether and always send the payment to AR only.

When a company has outsourced AR to a factor, your system should allow you to set the vendor master file in the company’s name and the factor in the pay-to field, allowing the check to go to the factor but the 1099 and history to the vendor. Even Quickbooks has this feature. When paying a factor, the second line should contain the name of the vendor so it can be easily cross-referenced internally, and also correctly applied by the factor.


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