In many ways, overpayments in an organisation’s ERP system are intangible, not noticed – and if left for too long – unrecoverable. It remains a fact that if you’re processing over 25,000 invoices a year, you will also be processing duplicates. The supplier may highlight the error, but often it’s either overlooked by both parties, or deliberately ignored. In the latter case, it’s interesting to note that this is often not thought of as fraud by the guilty party. Of course the onus should be on the buyer to ensure that their payment process is correct, but if the supplier notices, and then does nothing, then that is another issue entirely.
To some extent the situation isn’t helped by the relaxed attitude of senior management who accept a certain degree of error as inevitable. While it’s true to say that overpayments are unlikely to ever be eliminated completely – most organisations could be doing more than they are currently.
However, before an organisation can begin to address the problem, it will first have to undergo a period of navel gazing. As any plumber will tell you, plugging a leak is easy – finding out why it happened, and stopping it happening again, is much harder. Duplicate payments insidiously eat away at any organisation’s bottom line; small and insignificant at first – they soon add up to something more substantial. Often referred to as the dirty little secret in corporate accounting, even those organisations that claim they never make a duplicate payment, actually do.
So what Can Be Done?
- Don’t make any duplicate payments
- Since that’s unlikely, the fallback position should be - identify duplicates and overpayments before they go out the door
- And if that net fails, identify and recover them after payment
How To Tighten the Process
Firstly, it’s important to realise that although automation software has to form part of the solution, by no means is it the best place to start. As the root cause of the issue usually lies to a greater or lesser degree on human error – ensuring AP staff are fully trained, empowered, knowledgeable, efficient, and have enough time to work competently, should be any organisation’s starting and finishing position. In the meantime you should be addressing the following:
- Eliminate duplicate suppliers from your master supplier file.
- Paying at or near term will help prevent a supplier having to resend.
- Run a programme to identify exact amount payments to suppliers within 90 days.
- Keep track of every invoice that enters accounts payable, including disputed invoices. Never simply send an invoice back to purchasing for reconciliation with a supplier.
- Once you’ve located duplicate payments, keep track of the root causes. Ideally, run a weekly metrics check.
- Should your organisation install a new accounting system, make sure the old system is checked to see if the payment has already been made
- Although they shouldn’t, from time to time some suppliers will change the invoice number on a second send invoice, perhaps by adding a letter, like R for “repeat”, or the number 2, to indicate a second send. Regardless of why – it can cause serious issues in regards to tracking and overpayment. Keep a file of repeat offenders.
- Remember your Master Supplier File isn’t sacred text – if a supplier hasn’t been used in over 18 months, they can be archived (not deleted).
- Ideally, invest in a programme which will run a check on payments, prior to the send. It’s far more effective and cheaper to pick up overpayments before they are made, than rely on audit firms to recover them on your behalf at a later date.
- Periodically, hire a duplicate payment audit firm to search for duplicates which somehow still managed to find their way through.
Over the last few years, the world economy has forced many organisations to re-think the way they work, and it’s no longer acceptable to lack financial clarity. Just by making a few small adjustments to existing methods of working, and the implementation of new techniques, many organisations can find where the missing money is – and better still, can plug the leaking system while tightening up processes at the source.