Duplicate and erroneous payments are always a challenge within any accounts payable department. The primary challenge is the detection of the issue before the payment is processed. An additional challenge is the identification of the cause of the error and then the implementation of the needed process improvements.
But how are duplicate and erroneous payments identified? There are two ways—either through a traditional accounts payable audit conducted by a third party or by using self-audit tools and processes.
Upon confirmation that a correction entry does not exist in the data, a third-party audit firm will be contacting your supplier's receivables department to discuss the potential payment issue. The supplier will confirm whether the item in question is currently an uncollected error. Once confirmed, the third-party audit firm will request a refund check or credit memo for the appropriate amount.
The documentation provided in these types of audits include:
Many businesses have utilized the self-audit processes provided by their ERP systems along with standard three-way matching procedures. These controls provide the foundation for the detection and prevention of a double payment, but the results must be reviewed on a regular basis to prevent a supplier from being paid in a production environment.
A self-audit tool for the accounts payable process can provide necessary controls to identify duplicates and prevent them in the future. Used with standard ERP functionality, this tool can also detect a process issue that creates risk for erroneous payment transactions by combining additional analytics with audit results and by reviewing supplier payment trends.
|1. Pricing Errors||19. Supplier-sent Duplicate Invoices|
|2. Invoice Paid to Wrong Supplier||20. Insurance Rate Error|
|3. Adjustment to the Quantity on an Invoice||21. Contract Pricing Error|
|4. Escheatment||22. Duplicate Suppliers|
|5. Freight Change Adjustment||23. Invoice Paid in Wrong Currencies|
|6. Credit Memo Paid Rather Than Taken||24. Invoices Paid in Multiple Systems|
|7. Invoice Cancelled but Paid to Supplier||25. Supplier Invoicing Error|
|8. Credit on Closed Account||26. Coding Error - Entering Invoice|
|9. Overpayment on Check||27. Payment to an Incorrect Supplier|
|10. Credit for Warranty Work Not Used||28. Wrong Supplier Payment Stale Check|
|11. Overpayment on Invoice||29. Duplicate Payment - Same Supplier|
|12. Credit for Returned Item Not Used||30. Wrong Supplier Paid in Error|
|13. Overpayment of Invoice||31. Duplicate Payment Stale Check|
|14. Discount Not Taken||32. Volume Rebate Not Taken|
|15. Overpayment on a Lease||33. Duplicate Payment - Different Supplier|
|16. Deposit on Account||34. Duplicate Billing of Invoice|
|17. Stale Credit||35. Sales and Use Tax Error|
|18. VAT Error|
Now that I’ve identified how to find a payment error within the accounts payable process and provided you with the types of errors that can be made within the process, how do you ensure that the reason the payment problem occurs is addressed? This is accomplished by reviewing the results of either a third-party audit or your self-audit and conducting a deep dive into your process by reviewing each of the examples above and asking the following questions: