Duplicate payments can undercut the most effective Accounts Payable departments. They're a serious, costly and all-too-common issue.
Duplicate or erroneous payments occur when your A/P department pays the same invoice twice: the department sends out a second payment for the same product or service to the same vendor. They can be caused by any number of small errors, from two Vendor Master Files (VMFs) for the same company to more complex transactions across different payment methods.
When only 0.1% of payments are duplicates, it's easy to underestimate the impact of these errors. But at the scale of a company's yearly revenue, that small percentage is significant — and those losses don't account for time spent digging through invoices to identify duplicates and start the process of duplicate payment recovery.
The best way to handle duplicate payments is to avoid them in the first place. More industries are moving toward a preventative approach to duplicates and are becoming increasingly adept at avoiding duplicate payment errors. But too many departments assume that improved ERP systems will handle duplicates for them. In reality, there are several simple steps that every A/P department should take to minimize the occurrence of duplicates.
Consistent processes are the key to avoiding duplicates. Set standards for vendor naming conventions and onboarding steps, invoice coding rules, ERP matching, P-card procedures and more. Above all, enforce those rules diligently — the best systems only work when everyone uses them.
When you set data entry rules and follow them, you limit the possibility of duplicates. For instance, when you emphasize the importance of clean Vendor Master Files and set strict onboarding rules, you ensure that your VMF won't include duplicates like "IBM" and "I.B.M." Messy ERP systems or inconsistent conventions are a significant cause of duplicates, so ensure that your A/P department is following best practices.
Despite the best intentions, you'll still see duplicate payments in your system. You may have multiple ERPs that don't communicate seamlessly with each other. Moreover, every technology update or human resource shift will jeopardize your processes and increase the risk of duplicates, sometimes in unforeseen ways. Rules don't always work perfectly: when rules are broken, duplicates occur.
Awareness and best practices will significantly reduce your duplicate payments. An automated solution can support your efforts by assessing the likelihood that a particular activity is a duplicate or by identifying duplicate vendors across different ERPs. With that depth of information, you can start to clean up your system. But even with modern tactics, duplicate payment errors are never completely eliminated, and it's dangerous to assume otherwise.
Despite the best intentions and most diligent A/P practices, mistakes will happen. Duplicates will slip through the cracks. When they do, it's imperative that you identify those errors so you can start the process of recovering that lost revenue.
Fortunately, duplicate payment recovery is a tried-and-true process. Numerous companies specialize in recovery services for Accounts Payable, typically in the form of an A/P audit. These services vary by company, but typically include duplicate payment recovery, statement reviews and VMF analysis; the best services will include a root-cause analysis to help you pinpoint the source of duplicate payments. Nowadays, it's easy to avoid intensive manual audits by employing firms with audit software programs and automated recovery services.
There's a catch to the duplicate payment recovery process. False positives disrupt recovery audits by flagging the wrong invoices as duplicates. Automated recovery processes save time, but if they're not optimized for false positive detection, they risk either missing true duplicates, or being overwhelmed by false positives.
False positives are just as dangerous, if not more so, than the duplicates themselves. False positives can lull you into a false sense of security: if you see consistent false positives linked to a type of activity, you'll stop combing through those records — and soon you'll start to miss true duplicate payments.
Make sure that your recovery service is refined enough to detect and remove false positives, so you don't waste time and resources during your recovery efforts. You need an automated solution that actually works. For instance, Technology Insight's DataShark program is unmatched in its ability to accurately detect duplicate payments while hunting down false positives. The program also learns with you: when you flag a true duplicate, the tool ratchets up its review of that type of activity and adjusts the probability of false positives within that activity.
Ready to learn more about best practices for handling false positives? Download our guide now.
Karl Andersson has devoted his career to helping organizations improve their business processes. For 15 years, he has worked with multitudes of Fortune 500+ companies as the CEO of Technology Insight. Before this, he spent 10 years working in the audit and consulting sectors, which included large international projects in both Europe and Asia. Karl brings a combination of industry expertise and real-world experience. The diversity of his clients has allowed him to understand a variety of industries, and the unique challenges that each of them face.