What is a vendor number?
A vendor number is a unique identifier that a customer gives to each of its suppliers for internal record-keeping. It may also be referred to as a vendor code, supplier number, customer number, or vendor ID.
The main purpose of a vendor number is to distinguish a vendor from others in its ERP, accounting platform, or other record-keeping system.
In this way, vendor numbers aid in accurate invoice and payment tracking across various platforms. This identifier helps to avoid late payments, duplicate records, or payment errors, benefiting both vendors and their customers.
Key functions of vendor numbers
- Identification: Vendor numbers offer a clear and unique way to identify vendors in a large database of records.
- Transaction management: Businesses can use vendor numbers to search for suppliers in their database, submit purchase orders, and track invoices across systems.
- Financial tracking: Accounts payable (AP) teams can use vendor numbers to quickly match invoices to purchase orders and goods receipts for payment approvals.
- Streamlined processes: Vendor numbers support better efficiency, keeping businesses from misplacing critical vendor details due to name misspellings or inconsistencies.
Why are vendor numbers important?
There are many benefits to having a unique vendor identifier in tracking payments and invoices. Let’s take a closer look at what makes them so important.
Ensures the right vendor gets paid
To start, vendor numbers help companies avoid making erroneous payments to the wrong vendor.
This is particularly useful when a company has suppliers with similar-sounding names. In this case, the vendor number provides a clear way to distinguish the correct vendor.
For instance, with name-based tracking alone, an AP team may not know if they should pay Cottonwood Co, Cottonwood Co. LLC, or Cottonwood Inc., which are three separate vendors the company works with.
Avoids payment delays
Similarly, vendor numbers give AP teams a clear way to track vendor invoices for quicker approvals and payment processing.
Specifically, these unique identifiers enable the use of automated invoice matching against purchase orders and goods receipts. These systems help prevent manual data entry errors that create payment delays.
This compares to manual invoice processing, which would likely be necessary if a customer uses vendor names alone. By nature, manual processes tend to take longer than automated solutions.
Strengthens compliance
Well-managed vendor profiles with standard vendor numbers also help improve auditability and internal compliance practices.
Mainly, they make it easier to trace historical records, such as payment and purchase order histories.
This way, they can verify that invoices and payments are legitimate and made toward approved vendors. All activities that are attached to a given vendor number are logged, helping with fraud detection and prevention.
How do vendor numbers work?
The process of assigning vendor numbers looks different for each company. Typically, they’ll use a standard numbering convention to ensure consistency and clarity.
Here’s a quick view of how these numbers are generated and assigned during onboarding:
- The vendor submits their information for entry into the customer's vendor management system or ERP. This includes their legal name, tax ID, W-9 Form, banking information, and contact information.
- The customer’s accounts payable team reviews the submitted information for accuracy and legitimacy.
- Upon successful validation, the AP team either manually generates a new vendor number. Or, if they use an automated system, it may designate one for them using the company’s standards.
- The vendor number is assigned to the vendor’s profile, where contact information, invoices, payment history, and other critical information will be stored.
How to find vendor numbers
Internally, an employee may need to know a vendor’s number to submit a purchase order, look up their profile, or review their payment history. It’s not likely they’ll know it off the top of their head, so there are a few places they can look these numbers up:
- In ERP systems: Look up the vendor’s name or the person of contact in the ERP to find the corresponding vendor number.
- Reach out to the AP team: If you don’t have access to the ERP, contact someone on the AP or procurement team for help locating the number.
- Check physical documents: The vendor number is also commonly listed on purchase orders, invoices, and other official documents, which can be useful if they’re readily available.
Best practices for vendor number management
While assigning vendor numbers is just one aspect of vendor management, there are some best practices that companies should follow, including:
Use clear numbering conventions
Standardize guidelines for assigning vendor numbers to ensure each one has a unique identifier. This helps avoid confusion, overlap, or duplication.
Again, the exact numbering standards used are specific to each company. For instance, one company might only use numeric values (e.g., 10032, 10033, 10034).
Others may choose an alphanumeric method for further specification about the vendor’s offering, location, or other identifier. For instance, VEN-ELEC-103 might be an electrician the company uses, while TX-PLUM-23 might be a plumbing company based in Texas.
Automate vendor onboarding
Where possible, use automated systems to streamline vendor onboarding, automatically generating and supplying them with a unique identifier.
Not only does this eliminate the need to manually create and activate the vendor number across the company’s core business systems, but it also improves efficiency across the entire onboarding process.
Plus, it helps eliminate any numbering errors or inconsistencies with company standards, following the designated numbering conventions for each new vendor.
Maintain a centralized database
No matter what kind of system companies use to manage vendor profiles, keeping these details in one standard database helps eliminate confusion and preserve accuracy.
The database should be regularly audited and reviewed for consistency, looking for numbering inconsistencies, duplicate profiles, and any other inaccuracies.
Additionally, even if a company retires a vendor, it’s still recommended that they keep the vendor's profile in the system for a set period of time. This way, they reduce the risk of reusing a vendor number and erroneously paying a supplier they no longer do business with.
Challenges of managing vendor numbers
Though seemingly simple in concept, managing vendor numbers can be a tricky task for businesses of all sizes.
Complexity with growth
Especially as a business scales, it can become increasingly difficult to manage vendor profiles and keep the database up-to-date.
Data quality and consistency can fall by the wayside as more vendors are onboarded and the numbering standards are applied inconsistently.
The result? Teams might end up with duplicate vendor records for the same company or the same number being assigned to more than one vendor, creating confusion and incomplete records.
Manual processes
Teams that continue to create and manage vendor profiles manually must invest increasingly more time and effort to keep the database in a good state.
This makes teams vulnerable to human error, which requires further resources to rectify. Plus, it takes away team members’ time that could be spent on more valuable tasks.
Naturally, teams that rely on manual processes are more susceptible to operational bottlenecks than those that use automated systems. This can lead to longer onboarding times for new vendors, slower invoice processing, and even delayed payments.
System integrations
Finally, for seamless data-sharing across core platforms, the systems that a company uses to store and manage vendor information must be able to integrate.
More specifically, these tools should support compatible numbering conventions, ensuring that payment, invoice, and contact information can be easily shared from one tool to the other.
Otherwise, if these systems do not communicate easily, teams will need to employ manual workarounds to pass data from one system to the next, creating further slowdowns and the risk of data entry errors.
Upgrade vendor management with BILL
Whether you’re just getting started with your first few vendors or you already have a healthy directory, automated tools make it easier for you to maintain relationships, manage risk, and control costs as you scale.
With BILL’s AP automation software, teams can streamline vendor payments with seamless syncing to your accounting software, giving your team the flexibility to focus on your core business.
