As purchasing systems evolve and offer more process flexibility and expanded payment options, it is imperative that procedures be re-engineered to eliminate weaknesses that allow duplicate payments. The extent of the problem of over payment varies across companies and industries. However, it has been estimated that as much as 1% of all corporate remittances are duplicate or inaccurate payments.


In the past, bills were paid with one process; upon receiving an invoice, and after validating it against the authorizing document (purchase orders, contract, etc) remittance is sent via a check. This process with fewer possible payment venues was easier to audit for duplicate payments; but no less prone to duplicate payments than modern systems. With all the new payment and invoice delivery options now available, every company needs to be concerned about:

  • Payments being made twice using two different payment types
  • Professionals in numerous departments making payments without a formal process intended to avoid duplicate payments
  • Unscrupulous employees or vendors taking advantage of the increased "opportunities" to hide a duplicate payment.

 

 

Items that should be considered when establishing data entry standards for entering an invoice number are:

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.


Invoices without invoice numbers are another source of duplicate payments. A standard process for creating an invoice number where one does not exist should create the same unique number no matter who uses the strategy. For example; Supplier Number plus invoice date creates will create the same number no matter who processes this invoice.

  • 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?

 

 

[ D.I.Y. (DO IT YOURSELF) ]

 

There are service providers that offer for a fee rule driven data analyses that trap possible duplicate or over payments. These services are priced either as a fixed cost or for a portion of recovered funds. It is claimed, plausibly, that these efforts are successful in recovering funds disbursed in error. However, we do not recommend this approach for several reasons:

  • Transaction analyses based on rules are never 100% effective. Heuristic processes are by their nature iterative; and require time and diligence for the process effectiveness to improve to an acceptable return.
  • Paying a portion of recovered funds does limit the cost of recovery to less than the total funds recovered; but there is often a fixed startup cost for this service.
  • Capturing funds after the fact ignores the loss of availability of that cash for the period before the disbursement was caught.

 

We believe that the better approach to the problem of duplicate or erroneous remittances is a combination of: proactive data configuration; formal process controls; and reporting created to support continuous process audits. This approach has 4 advantages:

  1. There are virtually no fixed costs to implement
  2. Cost of the additional controls are minimal
  3. Most errors are captured before payments are released, and
  4. Internal audits add no additional cost to recovery

Should you realize that some of your current, or planned, processes are not consistent with the recommendations that follow, it does not mean that you have rampant duplicate payments. It is intended as a checklist to ensure you have done your best to provide the process controls to minimize payment error. And that you have established the necessary reporting for effective and frequent audit of disbursements.

 

Next: Minimize Duplicate Payments Pt.2 - Best Practices

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Beverly Dunn is a Customer Success Manager with Ariba. All customers are invited to join the private Customer Success group on Ariba Exchange, where you can access the Customer Success Spotlights, Lunch 'n Learn Webinar calendar and replays, and the Ariba Knowledge Nuggets.