25 KPIs for Accounts Payable Vendor Maintenance: Part 1 - Understand Your Vendor Master File

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Identifying the correct Key Performance Indicators (KPIs) to measure can assist Accounts Payable in improving processes, identifying problem areas, and becoming more efficient.  I was attending a conference a couple of years ago and there was a very interesting Accounts Payable (AP) team that presented on their improvements in Accounts Payable.  There were multiple team leaders and I was very excited to hear about improvements in Vendor Maintenance processes from that Team Lead.  After the presentation I asked if any KPIs specific for Vendor Maintenance were being tracked and we both acknowledged a need to identify relevant KPIs specific to this area. 

In these next two blog posts I will focused on KPIs specific to Vendor Maintenance in AP.  After all, what gets measured improves, and while most AP KPIs focus on Invoice Processing, I have identified 25 KPIs to track and measure the Vendor Setup & Maintenance Process and data in the Vendor Master File.  They are categorized in two posts – “Understand Your Vendor Master File” and “ Vendor Request Activity”. 

Understand Your Vendor Master File – 11 KPIs

With the recent increase of phishing scams AP Vendor Maintenance and the Vendor Master File is becoming more prominent than the function has been historically.  The importance of a clean and accurate Vendor Master File with “real” vendors is critical in providing support to identify problem areas, build a business case for digital solutions, be compliant with regulatory agencies, be compliant with company policy, and the overall protection from fraudulent activities. 

You may be able to pull reports directly from your Accounting System or ERP or use RPA to pull and consolidate data accordingly, while others may need to be manually tracked if that measurement is critical for your process, company or industry.   

  1. #/% of Vendors – Total Active:  Can indicate a need to Inactivate vendors, or identify normal spikes based on the time of year, etc.  Can be used in a business case to support a request for a vendor self-registration portal. 

  2. #/% of Vendors – Self-Registered in Portal:  If you have a vendor self-registration portal – track to see the adoption of the portal amongst suppliers.  Great measurement to show a reduction in the potential for fraud.  

  3. #/% of Vendors – Valid W-9’s/W-8’s on File:  Have you gone through a clean-up process and identified vendors that need to submit a missing/new/updated W-9 or W-8?  Track those vendors to ensure the forms are submitted. 

  4. #/% of Vendors – By ERP:  When there are multiple ERPs it can be based on your companies’ entities and business groups.  If the businesses are similar, look at processes in the vendor setup or P2P process that result in a larger number of vendors.

  5. #/% of Vendors -  ACH Method: ACH is the preferred method of vendor payments (especially for International entities).  Where does your company stand? If this KPI is low, does your company need an initiative to encourage your vendors to accept ACH payments?

  6. #/% of Vendors - Check Payment Method: Not only is the process of Escheatment come in to play, but also the handling and reconciliation of checks. If your KPI is high, does your company need an initiative to encourage your vendors to accept ACH payments?

  7. #/% of Vendors – 1099/1042 Reportable:  These vendors are those that need to be handled with special care to ensure that their information matches IRS records, not only throughout the year, but also near tax time when the forms are sent to vendors and filed with the IRS.  Identify these vendors and do an extra scrubbing right before tax time.  This can also give you an idea of costs for Forms or managed services, determine whether you are over the threshold and must file electronically at the state or federal level, and/or determine the number of team members needed to process annually. 

  8. #/% of Vendors – Foreign:  Identifies those vendors that need to be tracked for expiring W-8s or have invoices monitored to ensure coding is correct when distributing and filing 1042s.

  9. #/% of Vendors – Multiple Bank Accounts:  Is the number increasing month over month (or another interval?)  This could be a sign that bank accounts are being “added” vs “replaced”.  These are some vendors that require separate ACH banking details based on their line of business (banks do this for bank fees vs ATM fees for e.g.), but for others it could be a sign of an incorrect existing vendor update. 

  10. #/% of Vendors – Multiple Remittance Addresses:   Is the number increasing month over month (or another interval?)  This could be a sign that addresses are being “added” vs “replaced”. 

  11. #/% of Vendors – Multiple Partners:  For those SAP ERP teams – looking at the number of partners could find instances of duplicate vendors or identify vendors that need to be inactivated.  A waste management company could have many branches across the US where many partners make sense, but a mom and pop store rarely need more than a VN/OA/PI vendor partners. 

Bonus - KPIs To Share with Sourcing/Procurement

The Vendor Master File contains data for reporting that can be relevant to other departments including Sourcing/Procurement. 

  • #/% of Vendors – By Purchase Org

  • #/% of Vendors – Strategic Vendors

  • #/% of Vendors – by Channel

  • #/% of Vendors – PO/Direct

  • #/% of Vendors – Non-PO/Indirect

  • #/% of Vendors – By Industry

Come back next Thursday, June 27, 2019 for the second half:  “25 KPIs for Accounts Payable Vendor Maintenance:  Part 2 – Understand Your Vendor Request Activity”

Does your department track or measure any other KPIs related to the AP Vendor Master File?  I’d love to hear about it – comment below or email me at debra@debrarrichardson.com


Looking for an 8 Step Process to clean Your Vendor Master File in your Vendor Setup & Maintenance process? Get the eGuide or Toolkit. 

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Debra R. Richardson,

MBA, APM, APPM, CPRS

Debra is an accounts payable speaker, consultant, and trainer with over 20 years of experience in AP, AR, general ledger, and financial reporting for Fortune 500 companies including Verizon, General Motors and Aramark.

For the past eight years, Debra has focused on Global Vendor Maintenance, and implemented a vendor self-registration portal for 140k+ global vendors across five Accounting Systems/ERPs. In her consultancy, she focuses on internal controls and authentication to prevent fraud in the vendor master file.