AGENDA Sherry DePew Your Vendor Master File - A Strategic Resource Key Goals Vendor File Issues A Vendor Management Program Best Practices Questions and Answers

Your Vendor Master File - A Strategic Resource Vendor file is a key corporate resource Ownership belongs in AP (87%) Many disbursements are made to payees that typically do not have involvement with purchasing tax payments, garnishments, employee reimbursements, donations and customer refunds are some examples Limit who can add or update vendors People who can add or update vendors must not be allowed to process transactions such as invoices and purchase orders

Your Vendor Master File - A Strategic Resource (cont’d) Federal, state, international laws and regulations make it important to keep your vendor file accurate Eliminating duplicate payments, strategic price negotiations and accurate financial reporting are impossible without a clean vendor master file Jon Casher (IOMA vendor file management expert) says that any vendor file with over 1000 suppliers will require the aid of an outside expert to effectively manage

Key Goals - Vendor Master File Make accurate and timely vendor payments Reduce duplicate payments Comply with laws and regulations Catch / reduce fraud Know where you spend money Know your vendors Save money Company wide tracking requirements Diversity Business Continuity Treasury Procurement (Contracts)

Know Your Vendors How are these related? Marriott JW Hotels Renaissance Courtyard Residence Inn Fairfield Inn TownePlace Suites SpringHill Suites Ritz-Carlton ExecuStay Executive Apartments

Comply with Laws & Regulations Some Laws and Regulations Independent Contractor and 1099-MISC Non-Resident Alien and 1042S Gramm Leach Bliley Privacy Act Health Insurance Portability and Accountability Act (HIPAA) Office of Foreign Assets Control (OFAC) Foreign Terrorist Organizations (FTO) Bureau of Industry and Security Lists Patriot Act Sarbanes Oxley Other - Industry, Country, State specific

Cause and Effect Third party recovery efforts show the majority of duplicate payments today are caused by vendor set up problems and related suppliers Records show that 7% of the vendor population changed their name or corporate structure each year prior to July 2008 Experts predict that by the end of 2009 the rate will increase to 11 to 15%. If duplicate vendors are identified and merged in the vendor database over 75% of duplicate payments can be eliminated Vendor Leverage is about more than just buying smarter. While that’s a key objective, there are two other things that you in A/P can and should do as part of a Vendor Leverage Program. If you have better vendor information you can do things a lot more efficiently and effectively. Accounts Payable really has the big picture when it comes to vendors. Purchase Smarter Tony Freund gave some excellent ideas for how to go about purchasing smarter by negotiating based on better information. We strongly recommend that you incorporate key information deliverables into contracts - such as copies of their billing and receivables information. You should not have to chase your vendors to find out that you have outstanding credits or to find out how your payments have been applied. Include all of that in contracts. Process Smarter Many techniques can reduce manual transaction volume and hopefully error rates as well. EDI, electronic invoices, summary bills and P cards can all enhance but make sure you put in appropriate controls especially during cutover. Pay Smarter Pay smarter by using ACH or FEDI. Print checks less often than daily so that more invoices are paid on a single check. Many companies can reduce check volume by 50 percent by printing less often and by even more by using ACH or FEDI. If you’re a bank, get your vendors to open accounts - you’ll look like a hero to the marketing people..

Return on Investment Purchase Smarter Process Smarter Pay Smarter Know your full spend with the supplier and it’s family to negotiate better pricing Process Smarter Reduce the vendors in your pull down list to eliminate confusion and errors at the requisition, purchase order, and voucher level Pay Smarter Get the payment to right place the first time and eliminate stale dating, phone calls, past due invoices and statement research. Vendor Leverage is about more than just buying smarter. While that’s a key objective, there are two other things that you in A/P can and should do as part of a Vendor Leverage Program. If you have better vendor information you can do things a lot more efficiently and effectively. Accounts Payable really has the big picture when it comes to vendors. Purchase Smarter Tony Freund gave some excellent ideas for how to go about purchasing smarter by negotiating based on better information. We strongly recommend that you incorporate key information deliverables into contracts - such as copies of their billing and receivables information. You should not have to chase your vendors to find out that you have outstanding credits or to find out how your payments have been applied. Include all of that in contracts. Process Smarter Many techniques can reduce manual transaction volume and hopefully error rates as well. EDI, electronic invoices, summary bills and P cards can all enhance but make sure you put in appropriate controls especially during cutover. Pay Smarter Pay smarter by using ACH or FEDI. Print checks less often than daily so that more invoices are paid on a single check. Many companies can reduce check volume by 50 percent by printing less often and by even more by using ACH or FEDI. If you’re a bank, get your vendors to open accounts - you’ll look like a hero to the marketing people..

Vendor File Issues Some Vendor File Problems Missing or Invalid Tax Ids. Missing or Incorrect 1099 Categories Names Inconsistent with Tax Ids. Vendors tied to inventory items with very low turn rates. 35% - 65% of “active” vendors are one-time vendors Resource requirements result in a reactive approach to updates Electronic payments/purchase orders eliminate the dependency on good vendor data

A Vendor Management Program Assess Survey Current Situation Identify and collect ALL relevant documentation Identify ALL vendor files and data sources including those used for e-procurement, e-payment and p-cards Review and verify your actual Vendor Setup and Maintenance Processes and Controls against documentation Centralize the collection, storage and updating of all vendor related requirements in an environment accessible to invested users

A Vendor Management Program Cleanup (cont’d) Other Vendors You May Want to Look At Federal Government Departments and Agencies States Local Governments Postal Service Garnishments Petty Cash Foreign One Time

A Vendor Management Program Cleanup (cont’d) Review Possible Duplicates and Decide Impact of rules on other files/tables Which to keep Which to drop Which to merge

A Vendor Management Program Re-Assess Verify New Adds and Changes against Guidelines and Standards Review and revise procedures, guidelines and documentation, as required Train and/or Re-train, as required Utilize the next generation tools to prevent duplicates Remember to be successful this will have to be a process, not a project How do companies manage this without adding people?

A Vendor Management Program Enhance IRS TIN - Name Consistency Verify Name and TIN against IRS data OFAC and FTO Checks Check vendors against OFAC / FTO list and other lists Utilize 3rd Party Databases Add D&B Numbers Add SIC or NAICS codes Add Credit Information Obtain W-9 or Substitute Obtain Minority Owned Business, Women Owned Business status, etc.

Vendor Master File Enhance (Continued) Verify vendors against internal database and check to published lists Restrict adding and updating Review all adds and changes Secure a W-9 or substitute Purge and cleanup every year Use standard rules for names Use USPS and UPU rules for addresses Capture phone & fax number Involve purchasing for any new vendor who will be issued a purchase order

Vendor Master File Enhance (Continued) Lexus Nexus Bank Account Validation Diversity Business Continuity Scheduled & Ad Hoc Blanket Updates Vendor Self Service AuditSolutions 2008