Feeling out of control is not a feeling we like to experience. Reminders, sticky notes and to-do lists are a testament of us striving for control.
If this is true, how do we allow work to get out of control? It could be unclear ownership, lack of time or any number of other excuses.
One area we frequently see neglected is the vendor master file — a database used to capture pertinent supplier data and to pay vendors for products and services. Without strong controls and an established review process, the vendor master file can be easily exploited.
Common frauds include payments to shell vendors and related parties, duplicate payments, and fictitious invoices. These types of frauds are more likely to occur when segregation of duties are weak.
Whatever the size of your organization, the state of your current vendor master or shape of the control environment, here are some tips to regain control:
- Delete inactive vendors. Identify vendors who have not been paid in two or more years and delete them. This is the first step as it will significantly reduce the size of the population. For any vendors who have not been paid in over a year, we recommend a high-level review to determine if you plan to use them again. If not, delete them as well.
- Delete duplicate vendors. Next, search for any duplicate vendors. Compare names, addresses and tax ID numbers to identify duplicative information. If there is a true duplicate, you should analyze payment history to determine any duplicate payments or potentially fraudulent transactions.
- Do not commingle. Be careful not to commingle the vendor master with customer, employee or other related-party data. Commingling data increases the likelihood of fraudulent payments and enhances the challenges associated with controlling the population.
In part two of this article, we will review how to assess vendor and payment validity, ensure segregation of duties and conduct ongoing maintenance. With a leaner vendor master, these next steps will be less burdensome.
Interested in learning more? Connect with HORNE Franchise.
