Duplicate payments happen when a company pays the same invoice or for the same product or service more than once. According to the Association for Financial Professionals, duplicate payments average between .1% and .5% of an organization’s annual disbursements. So, if annual disbursements are $150M, duplicate payments may be as much as $ 750,000 and over a 5 year period, could reach $3.7M. Not an insignificant number for most organizations!
Invoices can be processed twice, statements processed as invoices, invoice number’s entered incorrectly, employee expenses may be submitted twice for reimbursement – all of these are examples of occurrences that can lead to paying for the same goods or services multiple times. Certain areas tend to be at higher risk of being paid twice, such as: receipt of products/services, construction projects, purchase orders with multiple invoices, consulting or maintenance agreements, recurring payments such as leases or debt payments, subscription services, and employee reimbursements.
The existence of duplicate payments can heavily impact organizations, leading to:
- Financial loss
- Strained vendor relationships/loss of vendor trust
- Loss of efficiency/increased workload for existing employees
- Potential legal issues
Ways to Prevent Duplicate Payments
Inadequate or missing controls make it easier for duplicate payments to occur, so it is important to have a robust control structure in place.
Consider the following actions to reduce the risk:
- Perform a periodic review/update of the vendor master file
- Deactivate vendors who aren’t being utilized
- Perform periodic vendor performance reviews
- Verify each vendor has a unique identifier and only one vendor number
- Implement automated invoice matching – utilize automated accounts payable system that matches invoices with purchase orders/receipts
- Require the use of purchase orders for all purchases exceeding established limits
- Implement strong segregation of duties control that is periodically reviewed, both functional responsibilities and systemic access
- Establish payment approval limits for each level of authority
- Utilize automated payment system programmed to cross reference and prevent duplicate payments
Ways to Detect Duplicate Payments
If a duplicate payment does manage to slip through, there are activities that occur that can detect duplicate payments. Examples of these activities include:
- Bank account/accounts payable reconciliations
- Exception reporting – utilize a reporting system that automatically flags transactions meeting certain criteria indicative of potential duplicate payments, such as implementing a continuous monitoring system that identifies outliers
- Reconcile vendor statements
- Establish hotlines and whistleblower programs
- Perform internal audits-review accounts payable/purchasing processes and controls
- Analytic/key metrics review
- Budget comparison
- Comparison to prior year activity/historical data analytics
- Invoice count by vendor, year over year review
- Utilize analytic software, such as Alteryx or Teammate Analytics
Contact Blue & Co. about Duplicate Payment Assistance
Recent projects completed by Blue & Co. include employee/vendor address matching to identify fraudulent payments to employees or undisclosed related parties and using Alteryx to identify potential duplicate payments to vendors or expense reimbursements to employees. If you are interested in how Blue & Co. might assist, please reach out to your local Blue & Co. Advisor or a member of our Audit team below.
Jeff Reed, CPA, Director
Peter Szostak, CPA, MBA, CHFP, Director
Carrie Bucher, CPA, Manager
Beverly Burch, CPA, CIA, CFE, Manager
