It is normal in projects to improve the Accounts Payable process to review the quality of the information contained in the Vendor master record.
There are different situations that can lead to this review: large number of incidents due to inexistent provider, extremely high number of telephone calls due to delayed payment, reclassifications due to error in notes….
Vendor Master Record and theit importance on Accounts Payable Process
One of the first questions we ask ourselves is: who is responsible for registering/maintaining the supplier master file? The answer is not always the same, although it usually depends on the size of the company. In large companies, it is usually a task shared between Purchasing and Finance/Accounts Payable (not long ago, we discussed the importance of coordination between these two departments ). However, in small and medium-sized companies, it is a task normally performed by AP.
Vendor Master Record : Qualit of information
It is important that the quality of information contained is good as it affects many aspects related to the accounting of invoices:
- Level of automation of invoice processing. The greater the percentage of automation desired, the great the confidence needed in the existing data. If we want the invoices to flow without human participation we should have complete trust in the veracity/quality of the processed information. We cannot think about accounting invoices automatically if the registers carried out have, for example, incorrectly calculated the invoice due date.
- Internal control. One sign of a deficiency in the supplier invoice accounting process is that validations frequently detect situations in which the supplier has not been created when the invoice is received. In this situation, the expense is known when the invoice is received, and in the vast majority of cases, there is no turning back. In this situation, can compliance with internal procedures for supplier selection or expense procurement be guaranteed? This situation is particularly serious in cases where the supplier can be classified as a supplier with an order, such that all of their invoices must be supported by an order issued by the company. How many internal rules have been broken for a supplier with an order to issue an invoice and the supplier not even be created in the database?
- Quality of accounting information. In many ERPs connected with the master vendor record, the tax indicators or accounts information exists by defect. If this information is not correct, it is normal that the error is transferred during accounting allocation and from this to the tax declarations. This causes problems when analyzing the accounting information and always ends up in reclassifications. And in the case of tax declarations, it could mean the necessity to present a corrected declaration and even paying some type of fine. There are also situations in which the same provider is created with different codes, which creates problems when analyzing information.
The experience in many different projects show that an efficient management of received invoices has as one of its pillars the correct creation and management of the vendor master record. And the first step in cost savings, even though at first it might not seem so, is that the quality of the master vendor record is reliable.
