I was recently speaking with a financial executive at a billion dollar plus company and I was surprised to hear him say that he didn’t feel his company could have a duplicate payment issue because they were SOX certified and used the most expensive accounts payable system. Anyone who actually enters A/P transactions into any accounts payable system, be it the most expensive accounts payable system or not, knows that SOX procedures and your accounts payable system are just two of the many controls necessary to stop duplicate payments.
This blog is to provide some real tips for stopping duplicate payments. As accounts payable professionals, you may already be familiar with some of the tips but I hope this will reinforce what you know and provide you with some new tips.
1. Clean Vendor Master File. All accounts payable systems are designed around the premise that there should only be one vendor master file record for each supplier. Vendor master files should be reviewed quarterly, at a minimum, to inactivate old vendors not used anymore as well as identify and remove duplicate vendors.
2. Consistent Data Entry Standards. Data entry standards around how to enter an invoice number are critical with the most important factor being consistency. Your A/P system will flag or stop a duplicate invoice if all of your A/P processors are entering invoice numbers consistent with your established standards. Items that should be considered when establishing data entry standards for entering an invoice number are:
- Are leading zeros entered?
- Are non alpha-numeric characters entered?
- What should be entered if there is no invoice number?
- What format is used to enter dates?
- What should the invoice number be if there is only an account number?
- What should be entered if the invoice number is longer than the allotted space within the field?
3. Consistent Business Processes Per Supplier. Many companies are moving away from entering manual invoices. Companies are moving to e-invoicing solutions and other electronic means of transferring invoicing. If you are going to implement a new electronic means of transferring data between you and your supplier, be sure that ALL invoices for that supplier go through the electronic transfer process. Key data elements your accounts payable system relies on to identify a duplicate payment can be different between manual invoices and electronic invoices. Because of this, duplicate payments will slip through when inconsistent business processes are used. Maintaining consistent business process will lead to less duplicate payments.
4. Implement Duplicate Payment Checks on All Electronic Invoice Feeds. Most companies are attempting to feed in data electronically versus entering invoices manually. We find that vast IT resources are spent developing the automated feeds. But we also find that most organizations do NOT design the same level of duplicate payment controls on automated feeds of data as they do for invoices that are entered manually. All automated feeds of data should have some level of duplicate payment control checks plus business processes to review the exceptions.
5. OCR Data versus Manually Entered Invoices. Many companies are moving to OCR Optical Character Recognition) software which scans the invoice and pulls off the vendor, invoice number, invoice date and amount. If you are using OCR technology, be sure that your manual data entry standards for entering an invoice are aligned with your OCR technology. For example, if an invoice number is 000482, most OCR solutions will read in all of the digits, i.e. 000482, as the invoice number. If your manual process is not to enter leading zeros then you will entered the invoice as 482; causing a duplicate payment.
6. Procurement Card Procedures. Credit card companies are pushing organizations to use procurement cards in their A/P functions. Historically, companies used procurement cards for low dollar items, but that is no longer the case. We have one client who is trying to get all purchases under $10,000 put on credit card. As the use of credit cards increases, we have seen a rise in the number of duplicate payments made where the item was paid via a credit card and an invoice. If you are going to use a credit card for a supplier, be sure that every transaction for that supplier is placed on the credit card. Develop reports to determine which suppliers you are purchasing items on procurement card and manual invoice and review these on a monthly basis.
7. Other General Items.These items are generally accepted best practices that most A/P departments are already aware of, but I have included them as a refresher.
- Receive all invoices to a central location
- Only enter invoices from original invoices (not faxes or emails)
- Minimize the use of check requests.
What do you think? I welcome your thoughts and feedback.