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
And one of the first questions we ask ourselves is who is responsible for the registration/maintenance of the supplier master? And 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 already commented on 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. A sign of deficiency in the process of provider invoice accounting, is that in the validations carried out, there is a frequent detection of cases where the provider is not created when the invoice is received. In this situation the cost is known when the invoice is received, and in the great majority of occasions there is no way back. In this situation, can the following of internal procedures to select the provider or cost provisioning be guaranteed? Especially serious are the cases in which the provider is catalogued as provider with purchase order, in such a way that all their invoices must be verified by a purchase order issued by the company. How many internal rules have not been complied with so that a provider with purchase order can issue an invoice, and the provider is not even 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.