CONFIDENTIAL 2015

Secrets You Need to Know

About Your

Vendor Master FileMarch 26, 2015

LIVE WEBINAR

Speakers:

Joe Flynn, Lavante Inc.

Josh Morrison,Lavante Inc.

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Panelists

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How to Earn Your CPE Credits

1. Must participate in all polling questions.

2. Attend the webinar for 50 minutes or more.

Introductions – The Panelists

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Josh Morrison, Sr. Consultant, Lavante

• Former F200 AP & Strategic Sourcing Senior Manager

• Extensive background in Procure-to-Pay & Supply Chain Relationships

• Expertise in Audit Controls, Compliance & Enterprise Systems

• Leading Process Improvement and Business Strategy Thought LeaderJosh.morrison@lavante.com

http://www.linkedin.com/in/joshmorrison

Joe Flynn, Founder & CSO, Lavante

• Former Director of Operations with Howard Shultz & Associates

• Recognized Industry-Leading AP & Procure-to-Pay Expert

• Pioneer of Industry’s Only Patented Automated Recovery Solution

• Father of 4 Wonderful Daughters

joe.flynn@lavante.com

http://www.linkedin.com/in/jflynn10

Agenda

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Secrets You Need to Know About Your Vendor Master File

• Criticality and Impact of the VMF

• Challenges in Managing the VMF

• Define Your Internal Risk Tolerance

• Three Pillars to a Best-In-Class VMF

• The Power of the VMF

• Summary

• Benefits of Thought Leadership

Why is a Sanitary, Healthy VMF so Critical

VMF is Center of all P2P Decisions

- Cornerstone of every P2P transaction

- Facilitates accurate withholding & reporting

- Aids in government & regulatory compliance

- Data framework for completeness & accuracy

- Serves as base for Key Performance

Indicators

- Supports adherence to contract terms &

corporate policies

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The VMF Impacts on Enterprise Decisions

Decision Support Scenarios

Scenario 1

Purchasing needs to have accurate expiry

information to manage supplier contracts for Legal

Scenario 2

Strategic Sourcing needs to analyze supplier

spend and usage data to reduce costs for HR

benefits

Scenario 3

Executive Mgt. needs to report diversity and

charitable contributions to support Compliance and

Tax as well as Sales initiatives with Customers

Scenario 4

Operations needs to find a new service provider

for security services to protect their Employees

and engages AP or Purchasing

Many Others….

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Impacted Areas

Why Errors Occur – The Human Element

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Effect

- Errors

- Fraud

- Duplications

- Regulatory Infractions

- Overpayments

Cause

- Human Error

- Multiple Owners

- Decentralization

- Conversions

- Uploads

Barriers to an Optimized VMF

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- Lack of Controls

- Inadequate Segregation of Duties

- Inconsistent Information Collection

- Missing Validation Protocols

- Excluded Payee Identification

- Poor Internal Communication

- Multiple Departments

- Data Decays

- Record Duplication

- Inaccurate Spend Analytics

- Supplier Bankruptcies

- Obscure Related Suppliers

- Insufficient Resources

- Change Management

- New Govt. Rule Changes

Define your Internal Risk Tolerance

Plan your Strategic Controls

-Government Validations

-Internal Process Verification

-Third Party Credentialing

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Government Validations

Create a Government Compliance Program

•Assess

– Ongoing screening

– Entire supplier list

•Monitor

– Continuous monitoring

– Notification & response

•Document

– Maintain up-to-date exclusion list

– History and notes tracking

•Report

– Report identified exclusions immediately

– Update supplier master file accordingly

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Internal Process Verification

Develop Internal Controls & Governance Program

-Standard Operating Procedures

-Sarbanes-Oxley Reporting

-Change Management & Workflows

-Segregation of Duties

-KPI’s & Strategic Initiatives

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Third Party Credentialing

Utilize Outside Resources for Data Verification

-U.S. TIN & E.U. VAT Match

-USPS Address

-Bank Routing & Account

-Exclusion List Identification

– OFAC, OIG, SAM, FATCA

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The Best-In-Class VMF

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• Duplicates

• Missing Data Points

• Inactive Accounts

• Inter-relationships

SYSTEMS, GOVERNANCE, TRANSACTIONS, ANALYTICS, PEOPLE

BEST-IN-CLASS VENDOR MASTER FILE PROCESS

SANITIZE

• Naming Conventions

• Segregation of Duties

• Add/Change Workflows

• Profile Completion

STABILIZE

• Regulatory Compliance

• Validation at On-Boarding

• Fraud Protection

• Supplier Self-Service

OPTIMIZE

The Three Pillars

Typical State• Large, Outdated VMF• Few Controls• Low Automation• High Risk of Fraud,

Lost Profits

Sanitize• Duplicates Removed• Relationships Identified• Validation Points• Aged Vendors Purged

Stabilize• Naming Conventions• Workflows• Complete Profiles• Segregation of Duties• Centralization• Reporting• Transparency

Optimize•On-Boarding•Fraud Protection•Supplier Self-Service•Data Collection•Data Validation•Roles & Permissions•GRC Controls• Integrated Workflow•3rd Party Validation•Enterprise

Collaboration

Vendor File Process Maturity Model

Reactive Tactical Strategic

Define Measure Analyze Improve Control

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Lavante Tools for VMF Situational Assessment

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Lo

w

L

eve

l o

f C

on

tro

ls &

Au

tom

ati

on

Hig

h

Smaller VMF Size Larger

< < < STABILIZE > > >

< < < SANITIZE > > >

< < < OPTIMIZE > > >

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Scenarios

Low Number of Suppliers – Minimal

Controls and automation

-- Need to Sanitize

Modest number of Suppliers –

Modest Controls and Automation

-- Need to Stabilize

Many Suppliers – Modest Controls

-- Need to Stabilize and add

automation to allow for Optimization

This is Who you want to be

-- Need to add workflow and stay

flexible for regulatory change

Now Consider:When was the last VMF Cleanse

Project ???

7% of VMF has changes annually

-- Jon Casher

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Needs Assessment Analysis

Sanitize

• Cleansing Data– Identify Related Suppliers Reduce Duplicate Payments

o (~30% of duplicate payments are result of dirty vendor master)

– Collect Missing Data Points

– Refresh Outdated Information

– Inactivate Old Accounts

• Understanding Suppliers– Cross Supplier

– Parents, Subsidiaries

– Multiple Sites, Divisions, or Locations

• Prevent Fraud– Average company loses 5% of its annual revenues to fraud (ACFE)

– 70% of companies were affected by fraud, up 9% from 2012 (Kroll)

o The largest area of increase was in the vendor master

o Supplier fraud increased from 7% to 19 % in only two years

o Only 30% of fraud was perpetrated by the vendors or suppliers themselves

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S a n i t i z e

Stabilize

• Understanding Errors– Minimize Opportunities for Human Error

– Centralize VMF Ownership

– Utilize Single VMF Instance

– Implement Standard Operating Procedures

• Best Practices– Standardize Naming Conventions

– Assure Segregation of Duties

– Create Add/Change Workflows

– Define Profile Completion

• Change Management– Documentation & Audit Trail

– Change Approvalso ~7% supplier change annually

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Optimize

• Governance & Controls

– Regulatory Compliance

– Risk Management

– Fraud Protection

• Supplier Collaboration

– Validation at On-Boarding

– Supplier Self-Service

– Cloud, Real-Time

– Automation

– Documentation &

• Spend Management

– Category Management

– Strategic Sourcing

– Spend Consolidation

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The Power of the VMF

Leverage

– Fraud detection and prevention

– Strategic Suppler Relationship Management (SRM)

– Create value chain partners,

o Improve working capital

– Improve accuracy of business transactions

– Document solicitation and retention

o (W9, W8, COI, Diversity)

– Accurate metrics and analyses

– Spend management

– Strategic Sourcing

– Exclusion list management

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Summary

• The secret is outYOUR VMF IS CRITICAL

• Tell your secrets– Executive Management

– Tax, Legal, Compliance– Department Heads– Supplier Relationship Owners

– Align AP, Purchasing, & Sourcing

• Achieve Best-In-Class– Automate, Stabilize, Optimize– Streamlined & Controlled Processes– Compliance; Regulatory, Corporate, Contract

– Real-Time, Collaborative, Documented– Comprehensive Profile Validation & Completion– Supplier Self-Service

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Benefits to Thought Leadership Members

1) VMF Assessment Questionnaire

– PDF with Results

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2) VMF Analysis

– Potentially Duplicate / Related Suppliers

– Missing Data Analysis

* Backed by NDA and SSAE 16 SOC2

Type2 certification

Benefits to Thought Leadership Members

3) Institute of Financial Operations

– Free Copy of FinancialOps Magazine

– 10% Discount from Fusion Event

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4) Mary Schaeffer - AP Now & Tomorrow

– 90 day free subscription to Weekly E-zine

– Discount on Book “101Best Practices for AP”

Next Thought Leadership Events

"Secrets You Need to Know About your Vendor Master File."

March 26, 2015 - 11am PST

"Detox Your Vendor File."

April 23, 2015 - 11am PST

Jon Casher and Josh Morrison outline that much of the data and records

residing in your vendor file are unnecessary and even damaging to your

ability to complete your daily tasks and hit your strategic goals.

"How to Take your Vendor File to the NEXT LEVEL"

June 23, 2015 - 11am PST

Jon Casher and Josh Morrison walk through the six indispensable steps

of the ideal master vendor file. Learn what it takes to be among the

industry's best of breed.

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Thank You - Questions

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Josh Morrison, Sr. Consultant, Lavante

• Former F200 AP & Strategic Sourcing Senior Manager

• Extensive background in Procure-to-Pay & Supply Chain Relationships

• Expertise in Audit Controls, Compliance & Enterprise Systems

• Leading Process Improvement and Business Strategy Thought LeaderJosh.morrison@lavante.com

http://www.linkedin.com/in/joshmorrison

Joe Flynn, Founder & CSO, Lavante

• Former Director of Operations with Howard Shultz & Associates

• Recognized Industry-Leading AP & Procure-to-Pay Expert

• Pioneer of Industry’s Only Patented Automated Recovery Solution

• Father of 4 Wonderful Daughters

joe.flynn@lavante.com

http://www.linkedin.com/in/jflynn10