6 Effective Ways to Prevent Duplicate Payment

Duplicate payments can happen to anyone. It’s a simple mistake to make considering the amount of work accounts payable (AP) teams do in a single day, but it can have severe consequences for your business.  

According to The American Productivity and& Quality Center, up to 2% of payments fall into this category. It might not seem like much, but as they start to add up, businesses can lose thousands of dollars. So, what is a duplicate payment and what can you do to prevent it from happening to your company? 

Duplicate payment defined 

When additional payments are made to a supplier that’s already been paid, it’s referred to as a duplicate payment. In other words, it’s erroneously been made more than once, which can cause significant issues for many businesses. This might happen by accident, although it’s also an indicator of potential fraud. 

Why do duplicate invoice payments occur? 

To prevent duplicate payments from occurring, you first need to understand why they might happen in the first place. In most cases, human error is the root cause of many examples, but software issues can also play a part. 

If your AP team is manually inputting hundreds, or even thousands, of invoices every day, the likelihood of an occasional mistake is almost certain. Just a simple lapse in focus could lead to a nine becoming a zero or an accidental switch of two digits. Additionally, employees working within a team that lacks standardized procedures are far more likely to become confused or negligent. Initiating protocols for all staff to follow can help to prevent inattention and expensive discrepancies. 

How do you avoid duplicate payments? 

Insufficient processes, inadequate budget controls and human error are the most common causes of duplicate spending. To identify and prevent them, businesses need a high level of visibility into their AP procedures and a firm grasp of any payments being made. 

To reduce or prevent the number of duplicate payments you’re experiencing, work these 6 steps into your accounts payable procedures. 

1. Review vendor master files frequently 

Vendor master files contain duplicate records more often than you might think. If this is the case for your business, the risk of making duplicate payments is much higher. The majority of software controls will only identify identical invoice numbers when they’re within the same vendor number, so it’s best to limit your master file to one record per vendor. If yours is messy, there’s no time like the present to clean it up and keep it well-maintained. 

2. Automate manual data entry 

Human error is one of the leading causes of duplicate payments. When AP staff have so much to do, it’s no surprise that bottlenecks are inevitable and can lead to mistakes. Automation can prevent these types of issues, as intelligent tools can speed up the process from intake to approval. 

Automating your data entry also provides the opportunity to implement workflows that align with the particular needs of your sector. These technologies are highly customizable so that businesses can develop processes that conform to institutional requirements. This kind of flexibility is one of the critical benefits of automated AP software. 

3. Ensure invoices are sent to a centralized location 

The more employees and separate departments you have submitting invoices, the more risk your business is incurring. Research has shown that 63% of businesses have received duplicate invoices and a third of companies have paid them. So, when you have multiple teams operating in several locations, it’s almost impossible to ensure they’re working effectively as a unit and errors are inevitable. 

Centralized AP systems collate all of the functions in one location with a single staffing group. With these processes in place, employees can quickly and simply pull up invoices from multiple locations, simultaneously. This increases efficiency by eliminating redundancies and also allows managers to view accounts on a single-screen system, as opposed to inputting several queries. 

4. Require vendors to provide PO numbers  

By requiring all invoices to have purchase order numbers, AP teams can sort through them much faster and perform three-way matching. This means the vendor name, order value and products or services rendered are identical across the invoice, purchase order and receipt. As a result, the volume of duplicate payments your business is making will drop, as they’ll become much less likely to occur in the first place. 

5. Get humans to review and approve your invoices 

Although human error is often one of the lead causes of duplicate payments, they can be vital in preventing them too. Automation is a crucial part of the AP workflow, but when it comes to approving invoices, humans should be involved before they are paid. Combined with useful tech, businesses can automatically route invoices to specific employees for a speedy approval process. 

6. Only pay the original invoice 

An invoice and a copy of a vendor statement often look extremely similar. However, they’re not the same thing at all and mustn’t be mixed up. When training your AP team, ensure they know how to make payments exclusively from the original invoice as opposed to any other document. 

Learn more: Understanding Accounts Payable: The CFO’s Complete Guide