SBO Quarterly Article || Bonefish Systems, LLC.

February 10th, 2012- SBO Quarterly Article

By Tom Mitchell, CEO Bonefish Systems, LLC.

SLEEP BETTER AT NIGHT: TREASURER BEST PRACTICES FOR VENDOR AND CONTRACT MANAGEMENTM

In my research of vendor management activity in public school districts and municipalities, I continue to be amazed at the diversity of products and services that must be acquired as part of their day-to-day operations. On average, our school district clients have over 6,000 vendors. On the high end, some have as many as 16,000. These vendors provide an extremely broad range of services, from bus parts to food services to text book suppliers and lawn care, just to name a few. ALL of these vendors must be under the watchful eye of a treasurer and their accounts payable staff.

Conversely, the treasurer's staff is generally made up of only one or two accounts payable clerks and a payroll clerk. With grounds, transportation, faculty, and administration all pushing purchases through the system, this small group of individuals have a daunting vendor management task. Have you ever had that uneasy feeling when you are signing a large stack of checks to a number of vendors in whom you don't really have any prior knowledge? Are you doing everything you can to ensure the safekeeping of the public funds you have that are so hard to come buy these days?

As if we need to compound matters further, regulatory requirements such as the Auditor of State Unresolved Findings for Recovery Certified Search and Federal Excluded Parties List System are in place to help manage these risks. These generally add steps to the already full day of the accounts payable clerk as they lookup, file, and manage results.

The challenges are clear and to better manage them, you must take full advantage of government supplied resources, internal procedures, and available automation tools. They can all support efforts to effectively and efficiently manage vendors. Below are a few key components that any vendor management program should include.

New Vendor Validation - "Know Your Vendors"

Steps should be taken to proactively manage the input of new vendors in an accounts payable process. Whether it is the athletic director or the maintenance supervisor requesting a purchase from a new vendor, a treasurer must apply the principles of "Know Your Vendors". Establish a checklist that must be followed before any vendor gets into the accounts payable system. It could look something like this:

    a. Confirmation that the business is registered and active with the Secretary of State through their Business Filings database. This is also the BEST way to input the proper vendor name.

    b. Verify vendor demographic information by checking their phone number, website, and address.

    c. Require a W9 before any payments are released.

    d. If there is even a remote chance that this vendor could be paid using federal grant money or the expenditures could reach $25,000, perform an Auditor of State Findings for Recovery Certified Search and Federal Excluded Party List System search. Take measures to demonstrate to the auditor that these searches were performed.

    e. Finally, perform a thorough search of existing vendors to ensure this vendor is not already in your system. Duplicate vendors are a significant problem with vendor management.

In addition to providing a clear set of expectations for the creation of any new vendor, an annual review of the entire vendor database should be conducted. Any vendors that have not been paid for a long time should be inactivated and duplicates should be merged. This is a step that could be performed by an independent third party as well. Putting a few key processes in place will help to ensure a well-managed vendor program. Tools such as the Electronic Vendor Audit System (eVAS) are also available from Bonefish Systems to help automate a number of these steps. If you would like further discuss your vendor management process or obtain additional information, contact (614)-427-eVAS (3827).


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