Service. On call.
Here’s why we incorporate this task into our normal Accounts Payable routine. The IRS requires every company to retain a current W-9 form for all vendors to whom your company has paid $600 or more in one calendar year. (Well, that’s the simplified version. (See this link for the IRS regulation: https://www.irs.gov/pub/irs-pdf/fw9.pdf)
Every January when completing our year-end procedures for 1099 forms, we inevitably find we don’t have a W-9 form for some vendors. There’s that frantic response of sending the request for the W-9, waiting for the reply, and then completing the 1099’s in time to file.
Want to stop the madness?
Every time, yes, every time, your accounts payable staff receives an invoice and before you send out that payment, ask “Is this a 1099 Vendor?” You can answer that question by sending out a cover letter and a copy of the W-9 form to the vendor indicating you cannot pay their invoice until you receive a completed W-9 form for your files. Their desire to get paid generally provides a quick response. Keep all completed W-9 forms on file (in case of an audit) and document receipt of the W-9 for all vendors, usually an accounting software classification. Now send the check. It’s as simple as that. And it will make your January a little less crazy.
We all want to streamline our procedures and run our offices as efficiently as possible. Here’s an example of how you can do that.
Sue Kohlmann is principal of Kohlmann Management Group (KMG). KMG is dedicated to helping small business incorporate proper office practices and procedures. She can be reached via email by clicking here.
HERE'S WHY...W9'S
Sue Kohlmann
This is the headline no one wants to see:
“Trusted CFO/Accounting Manager/Bookkeeper/Treasurer has absconded
with hundreds/thousands/millions of dollars of company funds.”
How does this happen? It’s almost always someone who has been with the firm for years. Or someone everyone likes. Or someone you would never expect. What?
It happened because someone wasn’t watching or an audit wasn’t properly conducted. Don’t create the opportunity for this to happen to you. It’s your money. It’s your company. It’s your responsibility.
As a small business owner, signing the company checks addresses a number of situations in an office setting. Let’s look at just one of them. It shows you are intimately involved in this part of the business. It shows you are aware of the current bank balance, your receivables and your payables. You decide which clients to poke for payment and which vendors to pay to continue that beneficial relationship.
Here’s a simple procedure. You must see all of the incoming mail and shipments. All of it. Snail mail and emails. Front door or dock. Or, you have access to all of it. This is a lot of work but you can do it. This is how you learn to “feel” your business. It’s the only way to gauge the amount of work in the shop to the orders in-house. This is how you “know” the inventory matches the vendor invoice. It’s the only way you know the check going out to a vendor is correct.
Do you know all of your customers? Did you invoice for all of the work or product? Locate the product that’s shown on that vendor invoice. Find out why there’s a change in vendors. Don’t let anything unusual slide by just because you’re really busy right now or you don’t want to interrupt your work crew.
You create a procedure to define and accomplish a task. This is a big-picture task. And you create this procedure because no one watches your money the same way you do.