I’m willing to bet that when President Obama signed the healthcare bill he did not realize the impact it would have on the master vendor files of organizations of all sizes. This is on top of the impending nightmare for accounting professionals who are responsible for 1099 reporting. Except for the largest of organizations, this task is handled in accounts payable.
Buried in the bill, The Patient Protection and Affordable Care Act, which was signed into law on March 23rd, is the provision that will require reporting of payments made to all corporations on goods as well as services. As AICPA Corporate Finance Insider readers already know, prior to this legislation, businesses only had to report on services and corporations were exempt from receiving 1099s. Forward thinking professionals are already taking steps to get in compliance and they are finding out quickly that the road is not a smooth one.
The Master Vendor File Connection
Accounting and finance organizations that employ the best practice of getting a W-9 from every vendor before any payments are made are ahead of the game. However, in the aftermath of the signing of this legislation, it has become increasingly apparent that such organizations are few.
Forward thinking organizations that are gearing up in the collection of the requisite W-9s are turning to their master vendor files to get started. And, this is where many are running into a brick wall. Here’s why:
1. Their master vendor files have not been cleansed on a regular basis. Thus, they have many inactive vendors in the files and will end up chasing many more vendors than they really need to.
2. There are duplicate and triplicate vendors in the master vendor file. Not only will they send out duplicate requests for information, when they receive a response, it may not be applied to all the entries for the same vendor.
3. They have not been tracking who they received W-9s from so they may be requesting them from vendors who have already supplied them.
4. The only address in the master vendor file is the “Remit To” address and it is a bank lockbox. Information sent to the lockbox rarely gets reviewed by the vendor.
5. Complete information for each vendor in the master vendor file is not always available. Thus, it is not clear who at the supplier should receive the request for a W-9.
Best Practice Solution
Many reviewing their master vendor files are finally realizing that they can kill two proverbial birds with one stone. Although it will not be pretty, they are cleansing their master vendor file in anticipation of doing a massive solicitation for the taxpayer identification numbers (TIN) they will need, to comply with the law.
At the same time they are requesting the TIN information, typically supplied on a W-9, they are updating the information in their master vendor files. They are also establishing best practices with regards to the maintenance and operation of the master vendor file.
There’s no way to paint a rosier picture. This is likely to be an ugly task for those undertaking it. However, those who are smart about it will start early by at least giving themselves a little extra time to complete the task. And of course, once the master vendor file is in tip top shape, savvy organizations will see that it stays that way.
Look for the silver lining by paying better attention to your master vendor file. Maybe now master vendor files will get the attention they deserve.
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Mary S. Schaeffer is the author of over a dozen business books including Travel & Entertainment Best Practices (John Wiley & Sons) and Fraud in Accounts Payable: How to Prevent It (John Wiley & Sons). She is the publisher of the CFO & Controllers Accounts Payable Management Journal, a quarterly electronic journal for senior executives concerned about internal controls and cost control in their payment function, writes a monthly newsletter, a free weekly ezine e-AP News, speaks at accounts payable webinars, seminars and conferences and directs the organization’s consulting practice. Corporate Finance Insider readers should note that the views expressed in this article are solely the author’s and does not reflect the views of the AICPA or AICPA Corporate Finance Insider.