Global business is also affected. Another report found that duplicate and erroneous payments are a particularly serious problem for businesses that pay international suppliers.2 This increased risk for duplication is likely due to inconsistent global payment processes, among other things.
The Common Causes of Duplicate Payments
Erroneous and duplicate payments can be the result of a variety of issues, some of which involve human error, while others arise from more complex internal business processes. Some of the common causes of duplicate or erroneous payments include:3
- Data entry errors, such as a misread number or a typo
- Errors in a master vendor file
- Pricing errors
- Adjusted quantity or price on invoice
- Invoice cancelled after supplier sent payment
- Vendor sent same invoice via multiple channels, such as email and snail mail
- Accounts payable sent same payment via multiple channels
- Major internal changes, such as software upgrades or mergers and acquisitions.
Fraudulent invoices can also lead to duplicate payments, but these instances are reported to be rare.4
How to Detect Duplicate Payments
It can be difficult for a business to detect a duplicate payment before the payment is processed, often because duplicates aren’t necessarily exact copies of one another. For example, duplicate invoices might have different dates or even different invoice numbers. This can happen when suppliers send both a paper and an electronic invoice, or if they re-send the same invoice after not having been paid by the agreed-upon date.5
In a perfect world, all vendors might notice duplicates and simply return the payment. But considering that some SMEs process as many as 450 invoices in a busy month, businesses might think about taking a proactive role in reducing the risk of erroneous payments.6
Experts say that the main way to detect duplicate payments is to audit the accounts payable (AP) department.7 This can be done internally by AP, itself, but that can prove expensive and inefficient—AP employees end up spending time searching for potential duplicates rather than doing their real job. Otherwise, businesses can outsource the audit to a third-party to detect, confirm, and resolve duplicates, but this can be just as costly.
In light of this, self-audit tools that continuously monitor AP processes are growing in popularity. This technology can be deployed to automate the detection process. While not perfect, observers believe that modern AI, machine learning, and data-analytics is making it easier and faster for businesses to identify, prevent, and even rectify overpayments.8 For example, AI, ML, and data-analytics can rapidly account for years’ worth of invoices, contact information, supplier contracts, and other relevant information.9
Experts note, however, that these modern systems are not yet perfect, because key payment information might be embedded within supplier contracts or conversational emails, and, therefore, can’t easily be identified and aggregated.10
Best Practices to Prevent Duplicate Payments
In addition to tapping technology, there are a number of other best practices recommended by experts to deal with duplicate payments:
- Keep a clean master vendor file (MVF): Roughly 30 percent of duplicate payments involve an issue with the MVF, according to Danny Thompson, senior vice president of market and product strategy at software company APEX Analytix.11 Many businesses already regularly review their MVFs for spelling errors, repeat entries, or missing information. Some experts recommend rotating this task among different employees to prevent fatigue. In other words, if the same employees are always in charge of checking the MVF, they may become normalized to the task, breezing through the list without paying enough attention to spot crucial mistakes.12
- Develop and maintain data entry standards: AI- and ML-based data analytics systems are becoming more capable of detecting duplicate payments, but most AP audit systems will only flag or stop duplicate invoices if data entry processes are consistent. Businesses might think about developing company-wide guidelines to address issues such as date format, whether or not to enter leading zeroes, what should be entered if the invoice number is missing, and what should be entered if the invoice number is longer than the allotted space.13
- Establish consistent payment methods for each supplier: Some vendors might send the same invoice via multiple channels, and there could be occasions on which AP does the same. While sometimes the product of human error, such duplicates can also occur when a business is undergoing major changes, such as a merger, acquisition, or migration to e-invoicing solutions. To prevent duplication, businesses might contractually establish invoice and payment policies for all vendors.14 Similarly, businesses that choose to pay suppliers through procurement cards may reduce the risk of duplicate payments by ensuring each transaction is paid with the card, rather than via manual invoice.15
- Monitor and limit payment requests: When payments don’t arrive on time, it’s not uncommon for vendors to submit a second payment request which, of course, increases the possibility of duplicate payment. Businesses can try to obviate this by establishing company-wide policies to limit manual payment requests to only circumstances when there is no actual invoice, for example.16
