Vendor Setup

What is vendor setup?

Vendor setup is the process of adding new vendors to your accounting system and establishing proper records before making payments. This includes collecting tax information, verifying business legitimacy, recording payment preferences, and assigning appropriate expense accounts. Good vendor setup practices prevent payment problems and ensure accurate year-end tax reporting.

Information to collect

Obtain a completed W-9 form for any vendor you may pay $600 or more during the year. Record the legal business name, address, and tax ID. Note payment terms and any early payment discounts offered. Document payment methods accepted and banking information for ACH payments. Assign a default expense account for categorizing purchases. Include contact information for accounts payable questions.

Verification before first payment

Verify the vendor is a legitimate business. Confirm banking details through a known contact method, not just what appears on an invoice, to prevent payment fraud. Match the W-9 information to invoices. Use IRS TIN matching to verify the tax ID before year end. Establish an approval workflow for new vendors to prevent unauthorized spending. Proper due diligence at setup prevents problems throughout the relationship.