Manage your 1099 vendor life cycle

The vendor life cycle is one of the most important components of compliance for companies. Oftentimes vendor onboarding is examined with only flowcharts and bullet points, leaving important information out regarding the process and value of compliance and data security.

When businesses examine the importance of vendors, it is necessary to focus beyond the initial onboarding and their separation to better understand the steps that occur throughout the entire duration of the life cycle. This article will explore the process a company must take to engage with the entire vendor life cycle: onboarding, verification, payments and 1099 filings.

Request onboarding documents

To begin the life cycle journey, businesses need to organize and collect vendor data by requesting W-9 forms. Many companies automate this process, so the entry is as simple as sending the digital W-9 request by e-mail. After you’ve received all documentation, you will set each vendor up with their own profile in your preferred accounting software tool. After the data is entered, systems can log the data along with the signed W-9 PDG and save it for your records.

Conduct vendor verification 

Once the W-9 is collected, the information can be used to validate the Taxpayer Identification Numbers (TINs) against the IRS records which can prevent your business from being assessed B-notices and penalties for reporting incorrect TINs. This is where you will want to verify that the legal name and the TIN/Employers Identification Number (EIN) or Social Security Number (SSN) combination provided by the payee match with the IRS database with Real-Time TIN Matching. Not adhering to these requirements could result in penalties and additional filing fees for corrections.

Test accounting tools and invoice payments

After verifying your vendors, onboarding them will be one of the easiest steps in the vendor life cycle. This is where you’ll set each vendor up with their own profile in your accounting software tool. During the onboarding process, you can conduct a test of the accounting tools to verify that accounts and invoicing are mapped properly.

Proper invoicing requires maintaining records of vendor payments throughout the year. This means not only making certain that individuals are paid on-time and paid correctly, but also determining what account should be properly credited, debited and assuring reports reflect that. Use your accounting suites invoicing tools as well as confirming payments are directed to the right accounts and account types with vendor mapping to chart of accounts.