Cleaning up your vendor master file in 7 steps

The vendor master file is the foundation under every payment your organisation makes. Yet in audits we almost always see the same picture: 10 to 30 percent of vendor records are duplicate, inactive or incomplete. Every redundant record is a chance of error, every outdated bank account a risk and every duplicate vendor a hole in your ERP system's duplicate payment check.

Why pollution is so expensive

• Duplicate vendors bypass the duplicate invoice check, which works per vendor number.
• Dormant records are a way in for fraud: nobody notices when an old vendor is reactivated.
• Incomplete data (Chamber of Commerce number, VAT number, IBAN account name) makes verifying changes impossible.
• Spend-per-supplier reports are wrong, so procurement negotiates on the wrong figures.

The step-by-step plan

1. Define the scope and owner. Appoint one process owner for vendor master data and record which systems and entities are included.
2. Export and analyse. Extract the full file from all systems and analyse it for duplicates using fuzzy matching: compare name, Chamber of Commerce number, VAT number, IBAN and address at the same time, because exact matches catch only a fraction.
3. Flag inactive suppliers. Everything without a transaction in the past 18 to 24 months goes on the deactivation list, after checking for running contracts and warranties.
4. Enrich the remaining records. Add Chamber of Commerce number, VAT number and legal name from external sources and verify the IBAN account name where possible.
5. Merge and deactivate. Merge duplicates while keeping the transaction history and deactivate what can go. Deleting is usually unnecessary and undesirable for the audit trail.
6. Set up the maintenance process. New suppliers only via a standardised onboarding form, bank account changes only after verification through a known contact channel and with a four-eyes principle.
7. Measure and repeat. Report quarterly on the number of active vendors, the duplicate rate and the lead time of changes, and repeat the analysis every year.

Do it yourself or outsource?

The analysis and merging require specialist matching tools and a lot of manual verification. Many organisations have the one-off clean-up done by a specialist and then keep only the maintenance in-house. Ideally, combine the clean-up with an accounts payable audit: the same data then immediately shows which historical payments went wrong because of the pollution, and those can often still be recovered.