How to Create an Automated AP Self-Audit Process

How to Create an Automated AP Self-Audit Process

Today’s AP self-audit tools provide powerful data analysis and reporting to detect a wide range of transaction errors such as duplicate payments, pricing and discount anomalies, fraudulent trends/patterns, and data quality issues. Most tools contain claim workflow management to ensure that once a recovery is identified it is tracked until final resolution.

In a continuous controls monitoring (CCM) environment, a self-audit tool for the accounts payable process can provide both detective and preventive controls. When properly used, the tool can prevent a duplicate or erroneous payment from being made. The tool can also detect a process issue by combining additional analytics with audit results and by reviewing supplier payment trends.

Implementing your automated AP self-audit process

Most self-audit tools help establish a historical database of at least two years of payment data. This data usually contains supplier master details, invoice details (header and line item), general ledger information, ERP document information, and payment information.

A production process then occurs in that a current payment file is sent to the solution provider to apply against the historical database. In a CCM environment, the payment file is sent daily or whenever there is a payment run within the accounts payable process.

Some companies prefer to use the self-audit tool as in a payment recovery mode. This means they’ll review payments already made to suppliers and will only send payment files on a weekly, monthly, quarterly, or annual basis for review.

Your automated AP self-audit toolkit

With an automated AP self-audit solution, there are usually five steps as recommended below. Depending on the solution and the user approach to implementation, the steps may change.

  1. Identify Duplicates – Duplicates are identified by reviewing payment data to determine if there is a high likelihood of a duplicated payment. Many accounts payment departments utilize filters and may select certain suppliers and higher dollar amounts to conduct this review before the payment run is initiated.
  2. Review Duplicate Reports – Reports are reviewed by supplier and invoice to determine the status in the workflow process.
  3. Manage a Supplier Claim – If a duplicate payment is identified after a payment has been made to a supplier, this is money due to your company. Your self-audit tool should have a built-in claims management process so that you can initiate and track the status of a claim.
  4. Review Workflow Reports – AP management may want to determine how well the self-audit process is working. Workflow reports are typically designed to give insight into volume and value of duplicate payments, the root cause of errors, as well as the suppliers to which duplicate payments are made.
  5. Review Additional Analytics – AP management and associates may want to perform additional analytics to fully “close the loop.” If a supplier has a significant amount of duplicate payments, there may be other concerns to review. A self-audit tool that provides supplier risk and compliance analytics can help you determine if there is a supplier fraud situation that requires additional action.

A preview of duplicate payment types

Many automated self-audit tools provide several different duplicate payment types. A “fuzzy logic” process is used to map current payment data against a historical database to look for payment errors. It’s up to the user to identify the duplicate payments and take the correct action in either stopping the payment or collecting the payment from the supplier. If a payment has been made to the supplier, a check or credit is collected as resolution.

Here a few examples of duplicate payments to consider:

  • Payments to the wrong supplier
  • Similar invoice number
  • Altered invoice date
  • Altered invoice number
  • Altered invoice and PO number
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