Q. We are currently working on setting up a purchasing department. We are curious about where some of the duty lines are drawn between AP and the purchasing department. We are in the process of determining which team will own processes related to vendors – setups, contacting for billing questions/issues or missing invoices, responding to payment status questions, etc.
(answered by the IOFM Advisory Panel)
Related to vendor setup: If accounts payable has the responsibility to send distribute the 1099s, my recommendation is to keep that with accounts payable. Yes, Purchasing teams have the vendor relationships; however, it's accounts payable that have to deal with regulatory compliance (Fed/State/OFAC), which is not normally the focus for purchasing. It's that focus on regulatory compliance that drives internal controls and best practices to keep the vendor master file clean and help protect it from fraud.
I do believe there needs to be a close relationship between accounts payable and purchasing, since purchasing will feel the downstream effects of AP vendor issues.
The purchasing deptartment deals more on the upstream side of P2P process (i.e., requisition-to-PO process), while AP deals more with invoice processing, recon, and payment. When it comes to vendor setup, this process can be part of either purchasing or AP. However, you cannot give the same people the responsibility of vendor setup + purchasing OR vendor setup + payment, as there are certain precautions that you need to follow based on segregation of duty rules.
Also, it is important to make sure that these teams are aligned and work hand-in-hand or side-by-side for handling various internal (business) and external (vendor) queries and provide required support on PO status, invoice status, and payment status. The best way to accomplish this is to have a common help desk employee for the end-to-end P2P process who can manage all PO-to-invoice queries.
It is always advisable to have a good synergy between AP and purchasing, including the vendor management process.
The way we did this was to have the VMF in AP. Purchasing and AP agreed on the data needed in the file and how that data would be obtained. Once the VMF was created, a welcome letter went to the supplier's AR controller, detailing how the relationship would be handled. For example, the invoice must be sent to AP via ACH (not to the requestor). Purchasing agreed to manage the P-card program with AP’s input. AP set up a web portal for billing questions and for sending VMF info (W-9/W-8 etc), and AP had a customer service team respond to phone and email inquiries.