How to avoid duplicate payments in accounts payable?
Accounts Payable is a department in the company that deals with many payments and tasks on a daily basis. From processing invoices, checking and verifying expense reports, financial recording, and more.
These tasks can often get repetitive and mundane on a larger scale. But they are still important and must be completed and the more manual effort that is involved, the more chances there are of errors occurring.
These errors can cause issues such as late payments or worse, duplicate payments accounts payable. Even with digital systems in place, sometimes duplicate payments accounts payable can arise if proper systems and precautions are not taken.
A duplicate payment is nothing but a payment that has been made twice. It can either be to the same vendor or to two different vendor accounts because of vendor naming errors.
The first and obvious effect of a duplicate payment is that you lose money that you should not have. If this goes undetected and the vendor or entity you sent the duplicate payment to also does not inform you about it.
Then you see a dissonance in your financial records later on and will end up having to go through a lot of hassle to detect and rectify the error.
It might also create a negative impression in the mind of the vendor who received a duplicate payment with regard to how your company handles its finances. That too only if they detect that they have received a duplicate payment.
Lastly, rectifying duplicate payments accounts payable also takes a lot of time and effort reducing the overall productivity of the AP team.
Errors while processing invoices, specifically when entering their numbers is a major cause of duplicate payments.
Companies tackle this by ensuring that they follow strict invoice coding standards to decrease the chances of a duplicate payment occurs. But even with such measures, there might be slip-ups.
Another cause of duplicate payments in business is when an employee makes payments to vendors on their own accord without telling the AP team.
While there is nothing wrong with an employee making payments to vendors using ACH or cards, it is important that they are taught to follow stringent coding standards used by the AP team so that the business does not end up making duplicate payments.
A business might be dealing with vendors who can be paid through various mechanisms. Some might take direct invoice payments whereas others receive through a purchase card payment.
In such cases, it might feel convenient to send them money in either way that they can receive it but the downside to this is that a duplicate payment might occur wherever dual payment methods are possible.
In the past when invoices were faxed, you could easily tell the original apart from the copy. But today, an invoice that is sent over email or as a PDF and is then printed is completely the same.
So it becomes tough to keep track of whether an invoice is an original document or if it’s a copy that has been made.
Due to this, it becomes tough to track if vendors who are sending invoices regularly have accidentally sent an invoice that has already been paid, leading to duplicate payments accounts payable.
When your employees are saving/searching vendor details on the platform that you use to make invoice payments.
There might be small errors in the grammatical correctness of how the names are put in that can cause the creation of duplicate vendor profiles.
For example, a vendor name such as ‘Dave’s Logistics’ can easily be saved as ‘Daves Logistics’. The small difference in the apostrophe will end up creating duplicate accounts for the same vendor.
Due to this, your team might end up sending a payment to both without knowing that they have already been paid.
If you use a vendor database management system to store all vendor information if it is a good practice to regularly check the database and remove any duplicates that you may find.
Taking small but helpful preventative measures like these can save you from dealing with the trouble caused by duplicate payments accounts payable.
Creating uniform data standards is a key component of vendor data management. If vendor details are not recorded in a structured manner in your database, it can cause confusion and mistakes.
Make sure that all the information that you record for each vendor is standardized and follows a set of rules that helps you identify and differentiate vendor accounts easily.
Another way to curb duplicate payments accounts payable is by confirming the tax information of your vendor. To do this, you use the IRS Taxpayer Identification Number Matching system and match the name and TIN combination.
This is a way of double-checking your vendor’s TIN before you file tax returns for your business.
Invoice matching is the act of verifying the details on an invoice with supporting documents such as purchase orders and goods receipts.
Invoice matching can be a two-way process where the invoice is matched with either the purchase order or the goods receipt or the process can involve a three-way matching system.
Where the invoice details are matched with the purchase order and the delivery/goods receipt to verify if they are accurate. Doing this can help you avoid duplicate payments.
Using a digital system in this day and age to handle your accounts payable processes can save you time on a lot of manual tasks within which errors such as duplicate payments occur.
Volopay is an all-in-one expense management platform that helps you automate accounts payable process. You can easily manage your bill payments and vendor payouts through a single portal.
Our platform is equipped with the capability of letting you create individual and corporate vendors and save them within our system while maintaining uniform data standards.
With Volopay’s ability to process payments in over 100 countries and 60+ currencies, you can easily manage all your vendor data in one place without having to use separate platforms to pay your vendors.
You can also set up approval workflows so that no money leaves the company budget without being approved.
This also helps in reducing duplicate payments as an error made by an employee can be checked by the approver which will save the team a lot of time and effort that would have gone into rectifying the mistake had it occurred.
Once an invoice has been paid, you can also easily sync all the paid invoices to your accounting software. This also reduces the chance of duplicate payments accounts payable.