You've successfully distributed 1099s to your vendors and filed the applicable 1099's with the IRS. You may have some 1099s to file with the IRS by April 1st (March 31st is on a Sunday), but for now it's still fresh in your mind the vendor record issues you and your team found with the vendor master file during the 1099 process. Happens every year, right?
There may be signs resulting from more vendor record issues too.
- Duplicate Payments – These can be caused by duplicate vendor records. Since Accounting systems and ERPs only allow one invoice number per vendor record, eliminating the duplicate vendor records means the same invoice cannot be paid to multiple vendor records for that same vendor.
- Returned ACH Payments / Notice of Change - Did the vendor’s bank account number change or vendor’s bank merge or get acquired? Your ACH payment to the vendor will be returned or you will Notice of Change notifying you that while the payment was successful, a change had to be made to banking information. You can verify the bank branch information and bank account ownership to avoid these notices and potential Nacha penalties if not corrected in a timely manner.
- Returned Checks, 1099/1042 Forms or Any Correspondence – When vendor’s move they may or may not let you know – and even when they do send a notice to your company, it may not reach the right team to make the change. Standardizing and verifying the status of your vendor’s address will prevent the rework you have to do when what you send is returned. Can you say “escheatment” or “rework” or “penalties”. These are all possibilities when you can’t reach your vendor.
- IRS Notices – For US companies, the annual IRS tax filing is no picnic to get through – but finding out that your vendor’s Legal Name + Tax ID combination did not match IRS records triggers a B-Notice process that can be just as grueling. An IRS TIN Match can catch those instances where a vendor changed their Legal Name and/or Tax ID or and didn’t think to notify you since they still may have been getting paid (or don’t have another payment due yet).
- Internal / External Fraud – Both internal (occupational fraud) and external fraud means that you have invalid remit information in your vendor master file. How long has this been going on? That can be hard to tell so you need to validate remit addresses and bank account information and check recent changes to verify they were requested from the vendor. Matching remittance information (address and bank account) against payroll records should be a recurring process in place to prevent internal fraud. You also need to inactivate vendors on a regular basis, so your vendor master file only has a minimum number of active vendor records that are open to fraud.
- Undeliverable Emails – Vendor employees’ transition to other positions within the company and to other companies making your vendor email address invalid over time. Since these email addresses can be used for remittance documents and for change confirmations, they should be checked to confirm they are still valid.
- Regulatory Fines – Did you file a late correction with the IRS because your vendor didn’t receive their 1099/1042 in time and couldn’t notify of a correction? Did you pay a vendor that was on a watchlist or exclusion list (OFAC/OIG, etc.) Verify your data and re-run your vendors against all applicable watchlists so that you can catch any changes or vendors that were added to these lists after you onboarded them or last updated their vendor record.
Speaking of watchlists - check out the webinar below to customize your own watchlist matrix so you won't get fined for paying a vendor on a watchlist.
One way to ensure that it will be done is to create a process and assign someone to perform it, and if you have multiple Accounting Systems/ERPs make sure it is being done across all. Check out another Putting the AP in hAPpy newsletter edition for tips and resources to help: Time to Clean Your Vendor Master File - 3 Tips
Start with at least 42 watchlists and customize. Attend this webinar to start with a template and customize from there to build your own.
Sponsored by
Financial Operations Networks (FON)
here are the immediate takeaways:
- Biggest pain points in the screening process that result in fraud and fines
- A common required watchlist validation most likely NOT being performed
- 5 Important steps to identify watchlist screenings required for your company
- Ready to customize Watchlist Compliance Matrix - Template
Click to Secure Your Spot to watch live or on-demand within 24 hours.
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