Mary Schaeffer

Fight Fraud and Duplicate Payments

Ignore master vendor file best practices — and pay the price.

December 4, 2008
by Mary Schaeffer

In the fight against fraud and duplicate payments, the master vendor file — the repository of all the needed information about a particular vendor — is often overlooked. Most accounting professionals know they should pay attention to it, but somehow there is always something more pressing so it gets pushed to the back burner. And, let’s face it, proper master vendor practices can be a royal pain when you are trying to get something done quickly. However, ignoring your master vendor file issues are no longer an option; they’re likely to get you in hot water with your auditors and will definitely get you dinged in a Sarbanes-Oxley audit. Poor vendor file practices represent weak internal controls.


Why make such a big deal about the master vendor file? It’s this simple: the better your master vendor file practices are the less likely you are to experience duplicate payments and fraud. And everyone knows neither of these is acceptable.

We should also point out that if you use the best practices discussed here, cleaning up the master vendor file will be much easier since you won’t have introduced duplicate entries and other errors.

And finally, we have a warning, something you probably instinctively know but have pushed onto the far recesses of your mind. If you’ve never cleaned up your master vendor file, the first time is likely to be a nightmare. On the bright side, once you have gotten it done the first time, subsequent cleansings will be easier.

Master Vendor File Best Practices

The following are best practices as they relate to the master vendor file. As you can see they conform to other generally accepted best practices for your accounting and accounts payable operations.

  1. Responsibility for the master vendor file can be in accounts payable, purchasing, or some other accounting department. The important point is that the person(s) responsible not have the authority to authorize a purchase, approve an invoice, or have anything to do with issuing the payment. For smaller organizations this often requires that the master vendor file reside outside accounts payable and/or purchasing.
  2. Access to the master vendor file for purposes of adding or updates is limited to those with responsibility for the files.
  3. A form should be created for updates and should not only be completed by the person requesting the addition/change but also signed off by someone at a higher level and the forms filed.
  4. Under no circumstances should passwords for the master vendor file be shared. In some organizations this is a firing offense as it completely negates other controls and makes it impossible to tell who made what changes.
  5. Strict naming conventions should be used for entering data. These should conform to conventions used:

    • For entering invoice data, especially the vendor name
    • For creation of invoice numbers for invoices without invoice number

    If these are not adhered to for every single entry into the master vendor file, duplicates will easily slip though.

  6. The master vendor file should be cleansed at least annually although more frequently is a good idea for larger organizations. Some organizations do it every two years and while this is certainly better than never, once a year is preferable.
  7. Deactivate inactive vendors, don’t purge them. You never know when you will need the information to research a vendor claim. Therefore, purging is a big no-no.
  8. Periodically, run a report showing the daily changes made to the master vendor file since your last report. In an ideal world this would be done daily but weekly or monthly is probably more realistic. The report should be given to a high-level executive for review. The main purpose of this routine is to serve as a deterrent to employees thinking about playing games with the master vendor file. It should also highlight questionable activity for further investigation.

Use these master vendor file best practices and see your duplicate payments plummet! Its fraud deterrent capabilities are a great side benefit.

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Mary S. Schaeffer is the author of over a dozen business books including The Controller & CFO’s Guide to Accounts Payable (2007 John Wiley & Sons) and the just-published Fraud in Accounts Payable: How to Prevent It. She serves as the editorial director of Accounts Payable Now & Tomorrow, a newsletter for professionals interested in payment issues, writes a free weekly ezine e-AP News and directs the organization’s consulting practice. You can read her thoughts on timely payment issues on the AP Now blog.