sixteen suggested guidelines to use … and document.
by penny breslin
it’s not just the numbers
one of the most time-consuming parts of reconciliation is attempting to discover why or where to allocate expenses. you want to find and pay the correct vendor. you also want to be sure that you have the vendor’s correct name and tax id number when 1099 reporting time rolls around, yet it won’t be easy to do so if you do not have a consistent vendor naming convention.
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consistent naming conventions are a critical component of good file management. the same is true if customer names are in the accounting program. any list really needs to have consistency of entry. duplicates and linking to the wrong record are common mistakes that take time to find and fix.
system capabilities and limitations
several factors affect how vendor names should be specified. answers to the following questions affect whether to use or modify some of the suggested naming guidelines.
- how many characters does your system allow for the vendor name?
- does your system allow more than one line for the vendor name?
- does your system allow for a different name to appear on the check than on a 1099?
- does your system allow you to look up a vendor based on a short name, full name or “sounds like”?
- when you look up a vendor and a list is displayed, how much of the vendor’s name and address can you see? (this is important in selecting the correct vendor.)
- are there limits as to how many characters or lines of name can be printed on checks; fed to other systems; appear on reports or screens; appear in window envelopes or on labels used for mailings? both the irs and the usps have recommended limits of 40 characters and up to two lines of name.
- does your system allow multiple addresses for one vendor under a common vendor number?
naming convention guidelines
some general naming guidelines for u.s. individuals and corporations are presented below.
- if the name includes corp, inc, pc, llc or llp, include that in the name when you set up the vendor.
- if the name of the vendor begins with the, do not include it when you set up the vendor, or put the at the end of the vendor name (e.g., the new york times should be set up as new york times or new york times, the).
- if the name is an individual, exclude name prefixes such as mr., ms., dr.
- avoid using periods (.), commas (,) or other special characters within a vendor’s name.
- use one space after each initial (e.g., john j jones, j j jones inc, a s aping).
- avoid using apostrophes in vendor names or in abbreviations of words in vendor names (e.g., readers digest association rather than reader’s digest association, or natl rather than nat’l as an abbreviation for national).
- replace ampersand (&) with and or drop completely if the vendor’s name is initials (e.g., jones & smith should become jones and smith, at&t should become att).
- omit dashes (-) except in hyphenated last names of individuals, (e.g., mcgraw-hill should become mcgraw hill).
- vendor names beginning with a number, (e.g., 3 com, 3m) should be entered as specified.
- names that begin with a year (e.g., 2013 u s open) that are likely to be used again another year should be set up without the year prefix.
- avoid abbreviations or be consistent in their use (e.g., pitney bowes credit corporation could become pitney bowes credit corp, p b c c or pbcc).
- if abbreviations are used, a short table of allowable abbreviations should be prepared and provided to people who are authorized to add vendors as well as to people who must find vendors based on name. some commonly used words in vendor names and useful corresponding abbreviations are:
- american – amer
- association – assn
- corporation – corp
- department – dept
- division – div
- incorporated – inc
- international – intl
- national – natl
- united states – u s or us
- if your system does not support two-line names, consider using the first line of address for the continuation of a vendor’s name. if the vendor’s name fits completely in the name field and the first line of address is required, put a period (.) in the first line.
- if the vendor is doing business as, trading as or known as, use the vendor’s actual name as the name and dba, ta or ka followed by that name as the second line of name or first line of address. if you must send the vendor a 1099, make sure that the way you’ve set up the vendor will correctly provide what must be fed to the irs.
- if the vendor asks that you pay a factor or a bank via wire transfer, set up the name for the vendor and put the name of the factor or bank as the second line of name or first line of address (e.g., john smith inc might be the vendor name and c/o abc factors might be the second line of name or first line of address).
- if the vendor is a taxing authority such as a town, city or state, set up the name of the taxing authority (e.g., state of new jersey, city of boston, town of needham) as the name. put any qualifiers such as department, division, etc. (e.g., insurance division, treasurer, secretary of state, recorder of deeds, water dept) as the second line of name or first line of address. for cities, towns and counties, you may want to include the state name as part of the vendor name (e.g., city of portland me). despite instructions on many property tax bills that specify that you make a check out to the name of an individual as tax collector, the check will be cashed if you make it out with the name of the taxing authority as the first part of the vendor’s name. (there are some exceptions to this rule – some filings require you to specify the name exactly as requested.)
- when setting up vendors for payments to medical groups, doctors, law firms, attorneys and other professional corporations, pay careful attention to how the name is specified, because they typically receive 1099s – incorrect specification of the name will result in a reject.
the irs has a new system to allow you to verify whether a name is consistent with the taxpayer identifier (see irs tin matching program). the system will not allow you to obtain a tin for a name. there will also be significant penalties for unauthorized access or misuse of their system.
be sure that all ap staff who are responsible for vendor input or who must look up vendors are thoroughly familiar with your naming convention through training and an available documented description of the convention.
if the ap file is in quickbooks, using abbreviations or number codes as vendor name is very acceptable. however, the company name is the part that will appear on any check.