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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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3–28. Shrink the Supplier Base

Part of the job of the accounts payable staff is to maintain a complete and accurate database of suppliers, which typically includes address and payment information. If data is entered incorrectly, the accounting staff is usually notified by a supplier that has not received a payment (because it was sent to the wrong address), has been paid the wrong amount (because of an incorrect early payment discount rate), or has been paid at the wrong time (because of an incorrect due date). This type of problem is inevitable in even the best-run company and will require some time to research and fix. However, the problem is greatly exacerbated in a company that has many suppliers, because there are so many chances for the supplier information to be incorrect. Another problem with having many suppliers is that there is typically little control over adding new suppliers (after all, that is how there came to be so many suppliers in the first place!). The accounting staff must deal constantly with adding new data to the supplier database, consolidating supplier records that have been entered multiple times, and (especially) making a multitude of small payments to a plethora of suppliers. Wouldn’t it be much easier if there were just fewer suppliers?

This is a best practice—reducing the number of suppliers. It is much easier to maintain accurate data in a relatively small number of supplier records, while there are few new suppliers to add to the database. In addition, ...

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