A new survey conducted jointly by InvoiceInfo and IRSCompliance reveals what companies are doing in their vendor onboarding process and how they’re doing it.
The good news is that a majority is doing at least some of the right things. Fewer, however, are doing those things right, or at least in the most efficient and error-reducing ways.
The full survey is available, but here are a few results highlighting some key responsibilities of vendor onboarding and methods.
In most instances, a vendor must be added to the vendor master file in order to get paid. But consider what that also means: once in the master file, a vendor can be paid! Checks can be written or electronic payments issued to that vendor.
Adding a new vendor to the master file is therefore consequential. With this in mind, there is some positive news in the survey. A majority of organizations — 54 percent – require multiple levels of approval for onboarding new vendors. Further, 63 percent of survey respondents validate new vendors prior to purchasing from them. Still, that means more than a third are purchasing before validating, though perhaps not necessarily paying.
The news is a bit better on the tax front: 91 percent of the participant organizations require a completed W-9 or W-8 prior to payment. Perhaps that’s because of the immanent IRS enforcement of accurate payment reporting.
Meanwhile, however, though the IRS has offered TIN matching to confirm vendor tax ID numbers for a decade now, just 61 percent are using it. Since no one likes getting B-notices, we assume they just have not found the time to incorporate TIN matching into their process.
This leads us to some results on how aspects of vendor onboarding is done. The news is less positive here. How so? In a word, paper.
It’s late in the 2nd decade of the 21st century – yet the majority of organizations are still pushing paper forms out to their new vendors to fill out. And mail back. (Okay, in some cases, they use a fax machine now! At least that gives them an electronic image.)
Sixty-nine percent of participants – a clear majority – say they onboard new vendors manually. When foreign payees are specifically called out, the percentage rises to 77.
Now it’s true that these days if you want someone to see important information, a hard-copy letter in the mail actually can be very effective. Perhaps a paper welcome package arriving in the vendor’s mail is a good strategy for getting their attention.
But as far as the call to action, i.e. “please provide …”, it’s best to get away from the paper. A paper W-9 filled out by hand and mailed or faxed back means someone opens the envelope and manually enters data, with the potential consequence of miskeyed information.
The same is true with other important information on a new-vendor form. Organizations need that information, whether remit-to address or account information for ACH payment, not to mention such information related to tax reporting as where the money was earned or the rental property is located.
Organizations want to minimize paper. So do vendors. What’s needed is an electronic connection point for vendor communications and information exchange – a vendor portal. The good news here is that vendor portals exist!
VendorInfo offers not only vendor self-service for obtaining invoice information, but also vendor onboarding capabilities. First, you can conveniently provide your vendor enrollment form and your tax forms (W-9 & W-8) electronically, which can be completed online.
Not only can vendors provide the needed information electronically, but VendorInfo also performs numerous validation checks for you. For example, it runs the tax ID through the IRS TIN Match program, it checks addresses for official USPS postal address format, and it runs the vendor against the OFAC SDN and other important government lists to ensure compliance. Further, once the vendor is approved, its data can be loaded into your system without re-keying.
It’s an efficient, effective way to onboard vendors and ensures key validation points are done for every vendor. There’s more it can do, and if you have W-8 vendors, you will want to hear about VendorInfo’s amazing capabilities to help you and them – in the next newsletter!
To see how VendorInfo onboarding solutions can benefit your operations and your company click here to request more information or call (678) 335-5735.