What Are All the Types of Duplicate Payments?

What Are All the Types of Duplicate Payments?

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.

Finding a duplicate payment

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.

Traditional accounts payable audit

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:

  • Reference number assigned to this item by the supplier (in the supplier’s receivables system)
  • The supplier’s contact name and number
  • Your internal company codes
  • Check numbers (if using this payment method)
  • Invoice number
  • Reason the duplicate payment occurred

Self-audit tools and processes

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.

Examples of duplicate and erroneous payments

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  

The power of analytics

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:

  1. Is there a breakdown in the manual billing process that can be addressed by e-invoicing?
  2. Should a workflow process be implemented for approvals?
  3. Should you implement invoice coding standards?
  4. Should you implement standards for setting up suppliers on your supplier master?
  5. How about updates to your Procure to Pay (P2P) policies and procedures?
  6. Are your System Access and Segregation of Duties policies of date?
  7. Are your requisition and purchase order processes disconnected?
  8. Would a supplier portal help your onboarding process?
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