Vendor onboarding process: who owns the record?

On Thursday afternoon, accounts payable gets an email from a supplier’s finance contact. They’ve changed banks, and the new details are attached on headed paper. It looks like every other supplier email that week, so someone updates the record in the ERP. On Friday, the payment run pays the supplier’s invoices into the new account.

Three weeks later, the supplier calls to ask where their money is. The email came from a lookalike domain.

Supplier setup is the step in procure-to-pay that creates the record every later step trusts. Purchase orders, invoices and payments all read from it, so an error made here gets paid out later.

What is the vendor onboarding process?

The vendor onboarding process creates one record for each new supplier once it has passed review: legal name, tax details, payment terms, bank details and contacts. Every system that orders from or pays the supplier reads that record. Changes to it, above all to bank details, are checked before they take effect.

Why supplier records go wrong

1. The supplier is set up twice. Procurement creates it in the procurement tool, and accounts payable creates it again in the ERP, from the same email.
2. Details arrive as attachments. Tax forms and bank letters come by email and are typed in by hand.
3. Bank detail changes are treated as edits. The field is changed like a phone number, with no call-back and no second approver.
4. Nobody owns the master record. Procurement thinks finance owns it, and finance thinks procurement does, so the two copies drift apart.
5. Duplicates build up. “Acme Ltd” and “ACME Limited” get separate records, separate terms and, sometimes, two payments for one invoice.

What it costs

Typos and duplicates cost time: payments on hold, invoices that won’t match, and suppliers chasing. Changed bank details cost money, and a payment sent to a fraudster’s account may never come back. Both problems start in the same place, a supplier record with no single owner.

What to fix first

1. Name one owner for the supplier record. One system holds the master, and the others read from it.
2. Create the supplier once, after review. A supplier that passes vendor risk assessment is created in the master and copied to every system that needs it.
3. Collect details from the supplier directly. A form the supplier fills in replaces typing from attachments.
4. Check every bank detail change outside email. Call the supplier on the number already on file, and require a second approver before the change takes effect.
5. Check for duplicates on creation. Match on tax ID and bank account as well as name.

The guide to building a vendor master sync has the prompts for each step.

Where it fits

Setup follows vendor risk assessment and feeds every step after it. The accounts payable process needs the supplier record to know who sent an invoice, and three-way match pays to the bank details it holds.

For the whole procure-to-pay process, from purchase request to paid supplier, see the procure-to-pay process.