When I heard the word "vendor", I used to think of guys selling things from carts on city streets. In my mind, those "vendors" were trying to forcibly sell me things I really didn't want. When I became a business owner, my definition of a vendor expanded. I now define a vendor as a person or a company that sells goods or services to my company to enable me to engage in my business. Some of my company's vendors, particularly the ones who want to sell me advertising space, still resemble the aforementioned street vendors shoving things at me. Other vendors, such as the companies that sell label-maker tapes, are ones that I eagerly seek out.
Love 'em or hate 'em, even the owner of a very small service business will have at least a handful of vendors. And since we pay our hard-earned money to those folks, we need to keep good records of our dealings with them.
Two Types of Vendors
1. If you sell any type of product, you need to purchase the product or the raw materials for the product from someone. These are your "Costs of Goods Sold".
2. Regardless of whether or not you sell products, your business will have other vendors for things you buy that are not directly related to what you're selling. These vendors provide things like phone service, office supplies, advertising, and accounting services.
Organizing Your Vendor Files
I mentioned the two types of vendors because that is a natural way to divide your vendor files if you have a lot of them. If you have only a few vendors, you can file their folders in the same drawer. Set up a file folder for each company or person for whom you purchase goods or services for your business. Inside each folder, include the following documents:
· Contact information sheet (staple inside the front of the folder)
· Contracts, letters of agreement, payment terms, line of credit (staple inside the back of the folder, with most recent on top)
· Paperwork related to purchases this year (invoices, sales receipts, paid bills, credits)
Keep the papers in each file folder in reverse chronological order.
Set up a parallel system of electronic folders in your computer to hold e-mails and electronic documents to and from each vendor.
Vendor File Management
· At the beginning of a new year, remove all of the papers related to purchases from the prior year, and put them with your other tax-related documents for the year just ended.
· Remove inactive vendor folders from your active file drawers. Store them with other inactive files according to your company's record retention policy. (You do have one, right? More on that subject in a few weeks!)
Your Homework for This Week
· Set up your vendor files (paper and electronic) if you haven't already done so.
· If you already have vendor files, go through each one and organize the contents. Remove any receipts from purchases made prior to 2009 and store them with your tax supporting documents for the appropriate year(s).
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52 WEEKS TO FINANCIAL ORGANIZATION - #38: Vendor Files
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