8 Steps to Avoid Duplicate Payments
AP automation solutions include extensive verification protocols to ensure that all invoices are correct and proper. They make it virtually impossible to pay duplicate or even fake invoices. Finally, they are embarrassing and reflect poorly on your company to your vendors and suppliers.
This is because they require AP teams to issue two separate payments and spend time identifying and correcting the error. Your vendor’s AR team must also spend time getting the money back to your company in the form of a credit. According to our most recent State of AP Report, 33% of companies still make over half of their payments via check. However, it’s not uncommon for checks to get lost in the mail, delayed or even sent to the wrong address.
By the time that duplicate payment has come out of your bank account, it’s too late. And paper checks only make things worse, sometimes clearing several weeks later. If overpayments aren’t corrected, your company could face serious losses, including the cost of additional audit services from an external audit firm. Companies have been known to lose up to $12,000 in a single month just on duplicated payments.
Use Electronic Payment Methods (Instead of Checks)
Without a clear, centralized system to manage payments, it can be difficult for teams to ensure that all bills have been paid correctly and on-time – without any duplicates. A duplicate payment occurs when a company makes the same payment twice for the same invoice or bill. Backlogs of unpaid invoices are more likely to create problems in invoice processing. Set up new vendors in the system as soon as invoices arrive and pay those invoices in a timely manner. Not only will prompt payment strengthen your vendor relationships, but it will also cut down on confusion in your AP department if vendors send a second invoice as a reminder for payment. Inadequate processes and budgetary controls are often the culprits in cases of duplicate spending.
Visibility is your best friend when catching and resolving overpayments. Regular accounts payable audits and reconciling invoices at the end of every month help the accounting team spot errors or possible problems. A clean audit trail also increases the accuracy of month-end reporting for teams creating financial statements. Limiting your vendor payment options to automated electronic payment forms reduces the likelihood of processing payments multiple times.
If you have a good relationship with your vendor — and if that vendor has their own excellent accounting practices — a simple request may be enough to get a refund. Depending on the circumstances, they could send you a check or agree to mark your next invoice as pre-paid. Cleaning data, implementing fixed payment processes, and leveraging payment automation can alleviate these types of issues. CoreIntegrator AP automation solutions also highlight unknown suppliers and addresses and send alerts to appropriate managers about possible fraudulent activity. Even if you catch them it is embarrassing to go about correcting them.
Can Duplicate Payments be Identified After they Happen?
If AP teams pay these fraudsters by mistake, they will still owe the vendor money and will need to make that payment again. This kind of duplicate payment can be more costly, since the money paid to the scammer may never be returned. Lack of visibility into the AP workflow makes it difficult to determine which payments have and have not been made. Using a centralized system for managing invoice payments can improve visibility into the AP process, making it easier to track and prevent duplicate payments. This includes assigning unique invoice numbers, updating payment status in the system, and setting up alerts for overdue or duplicate invoices.
A duplicate payment is an additional payment made to a supplier that has already been paid. Duplicate payments are caused by flaws in an entity’s accounts payable processes that do not detect the presence of prior payments. For example, the payables software should automatically detect a supplier invoice number for which a payment has already been made. The most common case in which duplicate payments occur is when a supplier invoice does not contain an identifying invoice number (as is frequently the case with periodic billings).
This may also require searching for duplicate addresses with separate business names if ownership changes due to a sale or merger of entities. It’s also important to regularly train employees on the company’s processes and any new AP technology. This includes setting expectations for communication within the department and identifying common red flags for invoices or payment information.
No one wants to do business with a company that creates extra needless work for them. Duplicate payments cause a variety of problems for companies and their vendors. And the best way to do that is to implement AP automation software that prevents it from happening. Tying all vendors back to updated W4 vendor information is one way to ensure the vendor only appears in your database once.
How to prevent duplicate payments
Streamlining your preferred vendor list is part of an effective procurement strategy, and it cuts down on the clutter in your vendor management systems. By reducing your vendor list, you may take advantage of better volume pricing, multi-site discounts, or more flexible contract terms. It also reduces the likelihood of misapplied payments in your invoicing system. Invoice capture technology can automatically extract key invoice data, such as vendor information and the invoice amount. This helps to ensure that all of the necessary information is entered accurately and consistently into your AP system. With just a few changes to your business processes, you can improve your cash flow and better manage your expenses, especially when you remove inefficiencies at the same time.
Issuing payments via electronic methods, such as ACH or virtual cards, can greatly reduce the likelihood of duplicate payments. Electronic payments offer a lot of benefits, since they tend to process faster, enable better tracking, and offer more security protections than paper checks. If duplicate payments are due to fraud and payment scams, AP teams still owe the vendor money. Payment schemes not only lead to duplicate payments, but they can also cause missed discounts and even result in late fees from vendors, creating additional expenses for the AP department.
In short, the best way to use tools like AI and automation isn’t to replace human beings but to work in partnership with them. Fortunately, that does not mean you have to accept a bloated, bureaucratic payment system. Your best option is to avoid making these mistakes in the first place. They usually charge a percentage of the money regained from their investigations as a fee. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. Schedule a demo to see how Order.co can simplify buying for your business.
Start by scheduling a demo of Order.co to see how software can help you double your productivity instead of your vendor payments. Procurement or invoice payment software often has features that can spot fraud as it occurs by flagging suspicious or duplicate payments. While over 5% of corporate spending is lost to fraudulent procurement, employing cutting-edge tools reduces the risk and the likelihood of fraudulent activity. One of the most common and costly issues AP teams face is duplicate payments. These erroneous payments happen when someone enters an original invoice incorrectly or a second invoice enters the processing system. Though duplicate payments are a common challenge for AP departments, they are avoidable.
Centralize invoice processing
It automates the manual data entry process, checks for invoice duplication, and registers each payment at the time it’s made, updating your books automatically. Other losses aside, duplicate payments and subsequent recovery audits or check requests can lead to strained relationships with your vendors and suppliers. And when it’s time to pay, CoreIntegrator’s OnPay Solution can automatically make electronic payments by check, ACH or wire transfer. Or why not use virtual credit cards and receive a 1% rebate on every payment you make!?
Duplicate spend is harmful to your financial health and reporting accuracy. It can cause cash leaks, invite fraud, and cause problems securing funding. In even minor cases, duplicate payments lead to frustration and potential company cash loss. As noted above, checks can get lost in the mail, take a long time to arrive, and may not always be deposited immediately upon their receival. As a result, checks are more likely to lead to delays and other problems, including duplicate payments.
- Discovering the pain points in your accounts payable process is crucial, and errors can be minimized with accounts payable automation software.
- Lack of visibility into the AP workflow makes it difficult to determine which payments have and have not been made.
- This helps to ensure that all of the necessary information is entered accurately and consistently into your AP system.
- If duplicate payments are due to fraud and payment scams, AP teams still owe the vendor money.
- If you have a good relationship with your vendor — and if that vendor has their own excellent accounting practices — a simple request may be enough to get a refund.
These systems make duplicate payments less likely and create a historical record for every payment transaction. However, these invoices can be sent in different formats such as mail and email, which can cause confusion and potential double payments. These mistakes are especially prevalent in hybrid workforces, where invoices may be sent to one location, while it’s already being processed digitally somewhere else. You can even pay digitally and have BILL send a paper check for you, so you don’t have to wait for that check to clear.
Regularly checking invoices for potentially fraudulent activity can help prevent duplicate payments, as well. AP teams should look for anomalies such as unexpected changes in payment history, unusual invoice numbers or amounts, and vendors that are not typically used by the company. Since AP teams are still on the hook for invoice payments after fraudulent activity, it’s important to ensure these invoices come from the right vendor and go to the right bank account. Duplicate payments are a huge headache for accounts payable departments and their vendors. For AP teams, they lead to wasted time and money and strained supplier relationships. But in order to eliminate the potential of duplicate payments, your organization must understand where they come from and how they occur.
If, at the end of three months, the credit has not been applied to any charges, the amount will be refunded or held for another thirty days. The decision whether to hold for an additional amount of time is made by the applicator and is dependent upon the likelihood of new charges being incurred. The cash applicator determines this likelihood by reviewing historical account activity. If a corporate account issues a duplicate or erroneous payment, AR will refund it immediately. When a customer makes a duplicate payment, it is placed “On Account”(an Oracle term) indicating the amount is due to the customer.
This can be done by automating the entire end–to-end AP process, so that invoices are captured, routed for approval, and processed automatically. Manual AP processes make it easy for duplicate vendor entries to happen. These duplicate files can also occur during mergers, acquisitions or other changes to the organizational structure. Additionally, large organizations may leverage more than one ERP, which can lead to duplicate supplier files. If a file exists twice in their ERP system, AP teams may not realize that a vendor has already been paid the proper amount. An AR cash applicator reviews the customer’s account each month to determine if the “on account “ credit has been or may be used against current charges.