Jon Casher, President of Casher Associates and Josh Morrison, 20-year veteran of an industry leading F200 shared service environment, will discuss the three pillars of achieving a best-in-class Vendor Master File (VMF) process. They will explain why the VMF is so critical to stakeholders throughout the entire organization as well as to its value chain partners. Our Thought Leaders will provide an actionable framework from which business owners can drive an effective and efficient VMF detox and how to then create a sanitary environment to avoid errors, data erosion, and missing information. Information provided in this session builds upon our last webinar, Secrets You Need to Know about Your Vendor Master, and provides the prerequisites needed to begin to achieve an optimal VMF program. In this 60 minute presentation you will learn: Why your VMF is so critical and how it can be strategically leveraged within your organization How to perform a superior VMF detox, including best practices in cleansing data, preventing errors and bad data, and gaining a better understanding of your suppliers Ways you can use your VMF to protect against fraud and mitigate risk How to create a real VMF compliance program to assure proper controls, segregation of duties, accountability and governance.

1. CONFIDENTIAL 2015
Vendor Master Detox:
How to Sanitize & Stabilize
your VMF Process
April 30, 2015
LIVE WEBINAR
Speakers:
Jon Casher, Casher Associates, Inc.
Josh Morrison, Lavante Inc.

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Panelists
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3. 3
How to Earn Your CPE Credits
1. Must participate in all polling questions.
2. Attend the webinar for 50 minutes or more.

4. 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 P2P Systems
• Leading Process Improvement and Business Strategy Thought Leader
Josh.morrison@lavante.com
http://www.linkedin.com/in/joshmorrison
Jon Casher, President, Casher Associates
• Founded Casher Associates, Inc. in 1976 to design custom financial systems
•Co-founded CM Associates in 1985 to provide financial industry software products
• Co-founded RECAP, Inc., an A/P Audit firm, in 1988
• Director of NASDAQ company from 2000-2006
JCasher@casherassociates.com
http://www.linkedin.com/in/joncasher

5. Agenda
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Vendor Master Detox: How to Sanitize & Stabilize your VMF
Process
• Criticality and Impact of the VMF
• The Three Pillars Maturity Model
• Prepare for Your Detox
• Execute an Effective Cleanse Process
– The Data
– The Process
• Summary

6. Criticality and Impact of the VMF
Why do we care
– Penalty
– Price of Non compliance
– Reduce Potential for Supplier Fraud
What is in it for me
– Enterprise coordination
– Leverage
– Decision support
– Standardizations
– Accountability
– Visibility
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7. 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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8. Reduce Fraud
Main Types of Vendor Fraud
– Requests that look like invoices or government forms with a filing fee
– Invoices for goods not delivered or services not provided
– Checks that sign you up for a service if you deposit them (may appear to be
refunds, rebates or credits for a small amount)
– Intentional double billing
– Collusion with an employee, kickbacks, bribes
– Fictitious companies
The Size of the Problem
– Kroll Global Fraud Report
o 19% of companies experienced vendor fraud in 2013
– ACFE
o 5% of revenues lost due to fraud
o billing fraud is approx. 24% of the total monetary amount of fraud

9. 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

10. VMF Impacts on P2P Functions & Processes
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The Supplier Affect™
Agreements
• Document Retention
• Terms & Expiry
• Deliverables Management
• Notifications
• Service Levels
• Contract Compliance
• Business Segment Alignment
• Pricing & Specifications
• Statement of Work/Effort
• Change Collaboration & Management
Systems
• Vendor Master File
• Data Collection & Validation
• Approvals & Workflows
• Notifications
• Regional & Local Considerations
• Accurate Capture of Agreement Terms
• Accurate Capture of Pricing & Attributes
• Supplier Collaboration
• Updates & Change Management
• Supplier Self-Service
Transactions
• Purchase Orders
• Order Confirmations
• Hosted Shopping (Punch-Out)
• Shipments & Receipts
• Invoices
• Payments
• Bank Reconciliations
• Discrepancy Management
• Quality & Errors
• Contract Compliance
Analytics
• Effectiveness & Quality
• Efficiency & Throughput
• Service Levels
• Risk & Fraud Mitigation
• Regulatory Compliance
• Benchmarking & Scorecards
• Growth & Development Strategies
• Trending & Forecasting
• Value Chain Partner Alignment
• Corporate & Social Responsibility
Relationships
• Quality
• Service Levels
• Errors
• Defects & Returns
• Strategic Alignment
• Growth & Development Partners
• Preferred Supplier/Customer Designation
• Operational Continuity
• Risk & Fraud Mitigation
• Cash & Working Capital
Suppliers & Supplier Relationships

11. The Best-In-Class VMF Process
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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

12. 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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13. 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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14. What to know before you Sanitize
Preliminary Steps before you Detox
• Understand the complexities of
managing your Vendor Master
– Data Decay - Document and data collection,
validation & ageing
– Processes – Cross department Communication
– Benchmark Statistics
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S a n i t i z e

15. The VMF Problem - Simplified
Supplier data constantly decays
Many data & documents required
Diverse supplier population
Communication complexity
Multiple internal locations &
division
Compliance to internal controls
Data Decay and Manual Processes Complexity
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16. The Human Element within the Process
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Effect
- Errors
- Fraud
- Duplications
- Regulatory Infractions
- Overpayments
Cause
- Human Error
- Multiple Owners
- Decentralization
- Conversions
- Uploads

17. Purchasing and AP can use Different Files and/or Multiple Systems
Data Quality and Consistency
– Missing
– Non-standard
– Invalid
– Obsolete
Why Vendor Files Grow
– Name entered differently by your staff
– Vendor changes its name
– Street Address and/or Lock Box changes
– Mergers
o By your organization and by your vendors
– Acquisitions
o By your organization and by your vendors
– Divestitures
o By your vendors
Other Vendor Master File Issues

18. Vendor Master Data Benchmark Metrics
• 20% - 80% of vendors in current vendor master files have had no activity
within the last 12 months
• 35% - 65% of “active” vendors are one-time vendors
• 7% of vendors change their name annually
• 20% of vendors change their HQ address annually
• Phone #(s), Contact Name(s), Email Addresses and Banking Information also
change
• The bigger your vendor file, the more duplicates you probably have
– 1-100 vendors - no duplicates
– 100 - 1,000 vendors - 1% - 3% redundant
– 1,000 - 10,000 - 2% - 6% redundant
– 10,000 - 100,000 - 4% - 10% redundant
– > 100,000 - > 10% redundant

19. The Data - Vendor Master Cleanse
Strategic Data Control Statement
– What are the acceptable sources of Data?
– What are the desired types of Data?
– How will you validate the data?
– Create a Data Guideline.
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20. The Data - Sources of Supplier relationship data
Sources of Supplier Relationship Data
1. Client data – Data that resides in ERP
or Procurement
2. Supplier Data – Data that supplier fills
in self service
3. 3rd Party data – Government & non
government
4. Data aggregators – Supplier
Intelligence
5. Lavante Network Data – Data that LSN
provides – Fraud score
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21. The Data - Score Your Current Data
Different Types of Supplier data
– Primary
o Core Supplier Name and Address
– Secondary
o Contact and Supplier Intelligence
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Regulated
Tertiary
Secondary
Primary
37.50%
17.50%
20.00%
88.24%
– Tertiary
o Documents and certifications
– Regulated Data
o Data that needs to be validated

22. The Data - Ad Hoc Data Quality Query Capability
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Ad Hoc Data Quality Query Tool
- Filtering
- Scoring
- Exporting
- Graphing

23. Create field guidelines for data format, validation and control
– Vendor Type and/or Class
– 1099 Type (Box)
– Phone Numbers
– Taxpayer Identifiers
– Payment Terms
– ACH, P-Card, EDI, etc.
– Diversity:
o Women, Minority, Small Business
Veteran, Disabled Veteran, etc.
– Insurance Certificate(s)
– Tax Certificate(s)
– Certifications
– Contacts
– Email addresses and web sites
The Data – Create Guideline of Data Controls
Field Controls
Size – Format
Score Weighting
Ownership
Privileges
Included in Workflow
Who can see it
Frequency of updating
Validation Source
More…

24. The Process- Vendor Master Cleanse
Strategic Process Control Statement
– Define the Roles?
– Define the Supplier Communication Strategy?
– How will we perform Validations and Verifications?
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25. Owner should be responsible for
– Defining data requirements
– Setting, maintaining and monitoring standards and data quality
– Coordinating the activities of those who use, enter and update vendor
information
Well Documented and Tested Procedures
– Define the process for doing business with new vendors
– Ensure that only authorized individuals can make changes, additions, deletions
Segregation of Duties Controls
– People allowed to make changes must not be able to process
transactions such as issuing purchase orders, posting invoices,
disbursing funds or making accounting entries
Audit Trail of Changes
– All additions, changes and deletions should be logged, reported, reviewed
and signed off by someone in management other than the person posting
updates
Reconcile and Synchronize
– If multiple systems have vendor information, reconcile common information
The Process – Define the Roles

26. The Process – Simple Supplier Communications
Have general conventions and standards
– Use a new vendor form with field names and positions similar to
where they are in your vendor setup screens
o Require names and signatures of requestor, person doing setup and person
reviewing and verifying correct setup information
– Standardize how vendor names are entered
o Insist that the guidelines be followed – verify periodically
- Punctuation
- Abbreviations
- Name Prefixes and Suffixes
- Name Qualifiers
Provide to Vendors
– Send out a welcome letter and information packet that identifies:
o What to do to get paid
o When a contract or Purchase Order is required
o Whom to contact regarding issues
o Optionally, ethics and dispute resolution guidelines

27. Regulatory
– Ensure that you are not doing business with a prohibited party
on the OFAC, FTO and BIS lists or other lists of denied,
debarred, excluded or restricted parties
– Check GSA System for Awards Management
– Verify that information for regulatory reporting is correct
o Get W-9s for US vendors and appropriate W-8 for non-US vendors
o Use IRS TIN Matching
o Check State of Incorporation or Local Jurisdiction
- Secretary of State or Office of Corporations
o Determine State Reporting Requirements
- State Withholding and “1099” Reporting
- Office of Child Support for Deadbeat Parent
– Check Industry Specific lists
The Process - Validations and Verifications

28. The Process – Ongoing Regular Communication
Communicate regularly with vendors
– Prepare a document that explains how a vendor should conduct
business with your firm
– Require vendors to sign a business practices statement
– Use email intelligently
– Accept electronic input
– Provide sufficient remittance information to vendors so that they
can properly apply payments
– Provide on-line inquiry and self service capability (Vendor
Portal)
– Monitor vendor performance – accuracy and timeliness of
invoices
– Consider having “Service Level Agreements” with your strategic
vendors

29. 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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30. Summary
• The secret is out
YOUR 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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31. Next Thought Leadership Events
"Secrets You Need to Know About your Vendor Master File."
March 26, 2015 - 11am PST
"Detox Your Vendor File."
April 30, 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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