Duplicate payments are a huge headache for accounts payable departments and their vendors. For AP teams, they lead to wasted time and money and strained supplier relationships. But in order to eliminate the potential of duplicate payments, your organization must understand where they come from and how they occur. Let’s take a look at the steps AP departments can take to avoid duplicate payments and improve AP efficiencies across the organization.
What are Duplicate Payments?
A duplicate payment occurs when a company makes the same payment twice for the same invoice or bill. These payments can happen in a variety of ways, such as issuing two checks for the same amount to the same vendor, accidentally making an electronic payment twice, or sending both a check and an electronic payment.
This type of error remains a challenge for many companies and their AP departments. In fact, companies waste between 1%- 3% of their budget on duplicate or incorrect invoices, leading 16% of financial leaders to indicate that duplicate payments are a top issue for their team.
How Duplicate Payments Occur
There are many ways in which duplicate payments may occur. Below are some common ways this mistake happens:
No Centralized Process for Receiving Invoices
Suppliers often re-send their invoices as part of payment reminders. However, these invoices can be sent in different formats such as mail and email, which can cause confusion and potential double payments. These mistakes are especially prevalent in hybrid workforces, where invoices may be sent to one location, while it’s already being processed digitally somewhere else.
Miscommunication & Lack of Visibility into the AP Process
According to Accenture, about 6 out of 10 high-growth companies have focused on productivity anywhere work models. Due to the pandemic, teams have shifted from in-person to either hybrid or fully remote. As a result, it’s important for company procedures to enable simple status tracking for invoice payments. Without a clear, centralized system to manage payments, it can be difficult for teams to ensure that all bills have been paid correctly and on-time – without any duplicates.
Lack of Digital Payments
According to our most recent State of AP Report, 33% of companies still make over half of their payments via check. However, it’s not uncommon for checks to get lost in the mail, delayed or even sent to the wrong address. AP teams must then reissue the check, which can cause wasted time and resources to cancel the original payment and send the new one. Without the right communication, these scenarios can easily result in a duplicate payment slipping through.
Payment Scams
AP teams need to identify fake invoices, so these don’t get processed. However, this can be challenging to do, since many fraudsters leverage existing vendor and invoice data to create their scams. In fact, 58% of accounts payable teams were targeted via email scams in 2021. These fraudsters may hijack an email chain or send look-alike invoices. If AP teams pay these fraudsters by mistake, they will still owe the vendor money and will need to make that payment again. This kind of duplicate payment can be more costly, since the money paid to the scammer may never be returned.
Duplicate File Entries in Your ERP System
Manual AP processes make it easy for duplicate vendor entries to happen. These duplicate files can also occur during mergers, acquisitions or other changes to the organizational structure. Additionally, large organizations may leverage more than one ERP, which can lead to duplicate supplier files. If a file exists twice in their ERP system, AP teams may not realize that a vendor has already been paid the proper amount.
Problems Caused by Duplicate Payments
Duplicate payments cause a variety of problems for companies and their vendors.
Wasted Time and Money
First and foremost, duplicate payments waste company time and money. This is because they require AP teams to issue two separate payments and spend time identifying and correcting the error. Your vendor’s AR team must also spend time getting the money back to your company in the form of a credit.
Strained Vendor Relationships
Since duplicate payments cause more work for your vendor’s AR team, this mistake can strain vendor relationships. Since suppliers are vital in doing business today, it’s important to prioritize these relationships and minimize errors in the payment process.
Missed Discounts and Late Fees
If duplicate payments are due to fraud and payment scams, AP teams still owe the vendor money. Payment schemes not only lead to duplicate payments, but they can also cause missed discounts and even result in late fees from vendors, creating additional expenses for the AP department.
How to Avoid Duplicate Payments
Below are some steps AP teams can take to avoid duplicate payments.
1. Streamline How You Receive Invoices
To streamline your process, your AP team should create a system for receiving invoices. Many AP teams choose to create a dedicated email address or inbox for all invoices, so that these all end up in a centralized location. Paper invoices can be scanned upon receipt and entered into the same system as the digital invoices.
2. Use Invoice Capture to Standardize Invoice Data
Invoice capture technology can automatically extract key invoice data, such as vendor information and the invoice amount. This helps to ensure that all of the necessary information is entered accurately and consistently into your AP system.
3. Check Invoices for Fraud
Regularly checking for invoice fraud can help prevent duplicate payments, as well. AP teams should look for anomalies such as unexpected changes in payment history, unusual invoice numbers or amounts, and vendors that are not typically used by the company. Since AP teams are still on the hook for invoice payments after fraudulent activity, it’s important to ensure these invoices come from the right vendor and go to the right bank account.
4. Improve Visibility in Your Process
Lack of visibility into the AP workflow makes it difficult to determine which payments have and have not been made. Using a centralized system for managing invoice payments can improve visibility into the AP process, making it easier to track and prevent duplicate payments. This includes assigning unique invoice numbers, updating payment status in the system, and setting up alerts for overdue or duplicate invoices.
Increased visibility also simplifies account reconciliation. Regularly reconciling your accounts payable transactions with vendor statements can ensure that all payments have been made correctly and on time. This can also help identify any duplicate payments that may have slipped through, allowing you to take steps to quickly address mistakes.
5. Use Electronic Payment Methods (Instead of Checks)
As noted above, checks can get lost in the mail, take a long time to arrive, and may not always be deposited immediately upon their receival. As a result, checks are more likely to lead to delays and other problems, including duplicate payments.
Issuing payments via electronic methods, such as ACH or virtual cards, can greatly reduce the likelihood of duplicate payments. Electronic payments offer a lot of benefits, since they tend to process faster, enable better tracking, and offer more security protections than paper checks.
6. Avoid Human Error
We all make mistakes, but duplicate payment errors can be particularly costly in the AP department. To reduce human error, teams should focus on the following:
- Improve the invoice approval process, so it is easier for approvers to remember what they have already approved.
- Standardize operating procedures, including how data is entered into the system and how invoices are received.
- Remove duplicate vendor entries from the ERP system.
It’s also important to regularly train employees on the company’s processes and any new AP technology. This includes setting expectations for communication within the department and identifying common red flags for invoices or payment information.
Teams can also minimize human error by removing the ability to make errors in the first place. This can be done by automating the entire end–to-end AP process, so that invoices are captured, routed for approval, and processed automatically.
7. Embrace a Paperless Process
Paperless AP processes are easier to track and manage. Digital payments cannot get lost in the mail and all of their supporting information can be easily found with a centralized AP documentation system. By going paperless and streamlining your AP workflow, your team also reduces its risk of losing invoices.
8. Use AP Automation to Automatically Check for Duplicates
AP automation solutions can prevent duplicate payments by automatically checking for them before a payment is made. These systems compare invoices and payment information against previous transactions to prevent duplicate payments from getting approved. Some AP automation systems can even send alerts and flag potential duplicate payments for manual review before they are processed.
For example, MineralTree’s invoice capture and coding process has built-in duplicate invoice detection to automatically flag and stop any duplicate invoices. The tool immediately alerts AP managers so they can remove the duplicate invoices before they advance any further.
Final Thoughts
Though duplicate payments are a common challenge for AP departments, they are avoidable. By implementing the steps outlined above, your department can greatly reduce the likelihood of making duplicate payments in the future, leading to improved efficiency and cost savings for your entire company.
Recently, the gene therapy development company Forge Biologics adopted the MineralTree platform to improve invoice accuracy and avoid errors during a time of unprecedented growth and a higher volume in terms of accounts payable. They now route their invoices to a dedicated email inbox that automatically captures and processes them into a streamlined workflow. Today the company pays 90% of its invoices electronically, saving money for their team and strengthening vendor relationships.
When it comes to improving AP processes and avoiding errors, having the right tools on board makes all the difference. The MineralTree AP platform and automation solution can help accounts payable improve efficiency, reduce costs and errors, and help your organization meet back-office digitization goals that lead to the agility and flexibility needed in today’s competitive marketplace. Request a demo to learn more.
