Conducting a vendor master file cleanse is fast becoming an imperative ongoing best practice process rather than a nice-to-have one-off project.
Gone are the days when a company could clean its master file every once in a while. Now, whether you’re a one-person business or an enterprise organization with hundreds of employees and thousands of vendors, you must keep your vendor master file clean.
As your company grows, it becomes more likely that your vendor master file will consist of missing, outdated, and inconsistent information. Conducting a vendor master file cleanse is necessary to improve accuracy and avoid errors each time you add new vendors to the list.
“Dirty data” from vendors can become a severe problem for a business as it grows. Large Enterprise organizations face the overwhelming job of processing tens or hundreds of thousands of different supplier interactions daily.
All this information needs to be processed, interpreted and managed by different staff across multiple departments.
Also, dealing with a fragmented vendor master file is especially challenging for organizations undergoing a software system upgrade or are involved in any mergers or acquisitions.
Poor vendor master file controls and “Dirty Data” can cost organizations millions in lost revenue in such areas as:
- Lost revenue associated with duplicate payments.
- Regulatory compliance issues.
- Increased operational risks.
- Miss calculated volume rebates.
- Fraudulent supplier payments.
- Lost cash discount opportunities.
Ensuring an organization’s vendor master file is in tip-top shape is one of the most important tasks a company should take on.
We have compiled 7 benefits of conducting a vendor master file cleanse to help convince you why this process is necessary for your business.
7 Proven Benefits of a Vendor Master File Cleanse
1) Eliminate or reduce duplicate payments
The vendor master file cleanse will also help you identify duplicate supplier numbers and help you consolidate multiple child/parent supplier relationships. All of this improved data will allow you to enforce better payment controls, which can help reduce duplicate and fraudulent payments.
2) Decreasing chances of fraud
Clearing, updating, and maintaining one’s vendor master file will lead to the transparency and control needed to reduce fraudulent financial scenarios.
The Association of Certified Fraud Examiners estimates that an average company loses about 5% of its revenue to fraudulence every year.
3) Staff productivity is improved when the vendor master file is controlled.
When you properly manage your vendor master files, they become more manageable for your staff to find the right vendor and their corresponding information.
In turn, it will become easier for your employees to complete everyday tasks such as invoice approvals and payments on projects more efficiently.
In addition to making it easier for your system staff, clean vendor files make it harder to create duplicate records. Lastly, your team will be happy to eliminate any time spent with files that should no longer be active.
4) Reducing costs through improved spending analysis and management
A vendor master file cleanup can help you identify which vendors are connected with your company, therefore helping you monitor and control spending.
You’ll also get the opportunity to improve your bargaining power when making purchases, requesting better payment terms for invoices, or improving debt ratios.
5) Provide an opportunity to reduce compliance vulnerability
A clean vendor master file can help you avoid regulatory compliance risks by examining the documents you currently have on file for a specific supplier.
You may find that the vendor master data you have might be old, no longer 100% accurate, incomplete, or missing during the cleansing process.
6) Reduce the amount of work required to manage the active vendor file
Absent a thoughtful, ongoing vendor master data cleanup and maintenance program, supplier information management can become expensive over time.
7) Implementing an ERP or a procurement system will help better catalog and manage vendors and transactional costs.
The success of an e-procurement system or a newly implemented ERP will all depend on the quality of data entered in it. Maintaining database cleanliness and integrity will help you to get the most out of your business system.
The vendor master file cleanse has never been more critical. Organizations recognize that poor data quality is costing them millions of dollars in lost revenue, and they’re finally taking the necessary steps to fix it.
If you haven’t started yet or had only done a one-time project, don’t wait for your next audit to begin this critical process.