Most ERP systems have monitoring capabilities in place to use invoice numbers, amounts, vendor numbers and dates to prevent duplicate payments. However, if any data was entered incorrectly, your ERP may not be able to flag the error.
Manually auditing internal files to detect and remove errors is a tedious, time-consuming process. To reduce the amount of corrective work that’ll need to be done later, follow accounts payable best practices and establish protocols and standards to prevent errors from occuring in the first place. How?
1. Set Invoice Coding Standards
The way invoices are set up differs from company to company, but not having an established pattern can lead to errors. For example, if an invoice is numbered 0001234, one person could enter it as “1234” and someone else could enter it exactly how it appears “0001234.” That lack of consistency can lead to duplicate payments.
To prevent those errors from occurring, follow accounts payable best practices and establish standards for how invoices should be coded. Should leading zeros be included? Can special characters be used?
Additionally, make sure there’s an established naming convention for split invoices. The first half could be called 124A and the second invoice could be entered as 124B to indicate that the invoice was split and prevent it being paid in full twice.
Establishing clear standards from the start can prevent data entry errors from causing duplicate payments and make it easier to reveal any coding errors that were made.
2. Keep Vendor Master Files Up To Date
In our experience, 30‚Äì35% of duplicates occur because of an unclean vendor master file. For example, if a company was entered as IBM the first time and then re-entered later as I.B.M., that can lead to duplicate payments. Or if a vendor is bought by another company, but outdated information isn’t deleted when the new vendor name is added, your team might inadvertently send payments to both versions of the same vendor.
Establishing vendor naming standards and conventions can reduce the amount of duplicates you have to remove when reviewing the files, and providing clear documentation of those standards can help employees consistently follow them over time.
In addition to taking the proactive measures of establishing protocol for adding and formatting vendors in the vendor master files, accounts payable best practices dictate that you review the files on a monthly or quarterly basis to ensure no errors slipped in.
3. Track Recurring P-card Spend vs. A/P Spend
If a branch’s electricity is paid for on a p-card and that invoice was also submitted to accounts payable by the vendor, it could get processed in both places, leading to the vendor being paid twice.
Documenting which recurring expenses are paid on p-cards as opposed to through invoices is essential for reducing miscommunications between p-card users and A/P. Having a system set up where A/P can monitor p-card use and track which expenses are paid via p-card instead of through an invoice can prevent payments from being processed twice.
Taking proactive measures can reduce the numbers of errors initially introduced, but unfortunately, some will probably still occur. Run exception reports to ensure standards are being followed, and consider using a reporting algorithm or software to reduce the amount of manual auditing that needs to be done.
Reporting algorithms and software can help take some of the manual work out of auditing and bring those errors to light. However, while a simple reporting tool can save auditors some time, general filters and linear reporting can lead to a plethora of false positives, which can lead to a lengthier review process.
More specific filters and algorithms, though, such as those you’d find with our tool DataShark, can remove those false positives as well, and really save time for internal auditors.