Understanding the true drivers within your company is a basic tenant of good business. The process of understanding causation takes many forms and goes by many names. Whether you know it as The Five Why’s, Ishikawa Diagraming or some other iteration of Six Sigma training, the fundamental and simple concept of discovery remains the same, that without a precise understanding of the real problem, a successful solution cannot be realized.
Within accounts payable departments, where the issue of duplicate payments is an on-going problem, an effective root cause log can reveal surprising trends.
Using root cause logs is a simple endeavor. Every organization gets phone calls from suppliers (the good suppliers, anyway) alerting them to a duplicate payment. “I got this extra payment.” “You overpaid us.” “You paid me for a returned item.” And, most important, “What do we do now?”
By tracking the components that lead to the phone call by utilizing a simple root cause log, you will be able to find the trends that need attention.
Below are the basics to include in your root cause log; you can add to them as it makes sense in your organization but I’ll caution you to keep it as basic as possible. As with anything else, if the log becomes too cumbersome, even visually (too many columns or too many pages), your staff may avoid it at all costs.
Additionally, it is vital that you emphasize that this is a discovery process, not a witch hunt, so that your staff will embrace the concept that “Correction is Prevention”.
- Vendor Name
- Amount Overpaid
- Duplicated or Overpaid Invoice number
- Format of overpayment — Check, ACH, P-Card, etc. (Make sure this is the format of the overpayment, not the original payment)
- Cause of Overpayment — Invoice Duplication, Returned Item, Overlapping Payment Type, etc.
I would challenge you to do this for at least six months and see what it reveals. Keep it simple and manageable. Then each month, tally up the root causes and see what you find, the result may surprise you or simply confirm what you originally suspected! Either way, it will give you the ability to implement appropriate business process changes.
To know more, join Karl Andersson, CEO of Technology Insight in a series of webinars dedicated to Best Practices in Accounts Payable. Click here to view the list of upcoming webinars.