29 Aug When Should Vendor Onboarding Begin?
The time to start thinking about compliance with federal regulations, such as Information Reporting (1099s) and checking vendors against databases, such as the Office of Foreign Assets Control (OFAC), Specially Designated Nationals (SDN) and other sanctions lists, is before the vendor has provided a product or service, not once the invoice has been received and is being paid by accounts payable.
In reality, how many organizations verify that an organization is not on sanctions lists before purchasing a product or service from them? How many companies consistently require a signed W-8 or W-9 before doing business with a vendor?
In many cases the onboarding of a new vendor begins when an invoice is delivered to accounts payable. Most companies have a policy that they will not pay an invoice without a W-8 or W-9 on file because they know how much easier it is to get these documents when withholding payment than it is after payment is made. But, at this point the product has been purchased or the service provided. According to the OFAC site, its regulation states that if a person or entity is on the OFAC list, U.S. organizations or persons may not do business with that company. It does not talk about payment.
So, the question becomes, who is responsible for validating vendors and ensuring compliance — procurement or accounts payable — and when? InvoiceInfo would like to hear your tips for onboarding new vendors. Email your tips to firstname.lastname@example.org.