In most businesses, the credibility of the accounts department is built on trust and stakeholders’ confidence in the output from the department.
Significant events, like a fraud or material errors in management accounts, can severely damage that confidence. Less significant items like minor payroll errors or duplicate payments can also quickly eat away at confidence in the finance function.
Duplicate payments have the added impact of being seen outside the organisation, and nobody likes their dirty washing being laundered in public.
Are duplicate payments really a problem?
Duplicate payments, whether material or not, are a symptom of an underlying problem in accounts payable that brings into question the completeness of processes and can reduce trust in how finances are being managed, tracked and reported.
Our recent research report ‘Changing trends in the purchasing processes of UK businesses’ suggests they are a problem, with 28% of finance decision-makers reporting they are a regular occurrence.
Of the remaining 72% of respondents, 27% are convinced they have never made a duplicate payment, 4% are unsure and 41% admitted to infrequently making duplicate payments.
Though zero tolerance of errors is a laudable goal, nobody made an omelette without breaking an egg. So unless these infrequent duplicate payments were material in amount, it is unlikely that they are a significant problem.
If you can’t even keep track of your own payments how can you be trusted?
Frequent duplicate payments impact:
- Internal confidence in a business’ processes and confidence in accounts;
- Confidence of suppliers;
Productivity is impacted as teams try and chase down and retrieve duplicate payments and consume more time trying to investigate them to discover why they were made in the first place.
It is all about prevention
One solution to the duplicate payments problem is robust checking at the payments stage. However, a post-completion audit of all invoices approved and posted by suppliers can be labour-intensive.
Attacking the root cause of the problem, duplicate approved and posted supplier invoices, upfront is going to yield the highest return.
Implementing purchase order processing will significantly reduce the risk of duplicates by requiring that invoices match open purchase orders.
Supplier invoice processing that requires the consistent application of approval rules and roles will also significantly reduce the risk.
Automate to improve
Wholly manual systems for purchase orders and supplier invoice processing are often a source of risk for duplicate payments.
A lack of visibility of a paper invoice “in flight for approval” for example might result in an employee requesting a copy invoice from a supplier when asked about the progress in processing the invoice.
Using software to automate parts of the process can significantly reduce these risks, enabling the visibility of transactions throughout the process.
Software can also ensure that approval roles and rules are applied consistently and that those responsible for approval see accurately processed transactions quickly, particularly as the efficiency of automated data capture speeds up the process.
These processes can also highlight potential duplicates.
Automation moves the focus of the finance team’s work away from manually processing invoices. It allows you to move towards checking and reviewing transactions, dealing with exceptions and making improvements to the business.
Frequent duplicate payments can be like kryptonite for an accounts payable department, removing the confidence of internal and external stakeholders and impacting productivity.
When they occur frequently, as appears to be the case in close to one-third of the UK businesses in the survey, duplicate payments are a symptom of a deeper problem that needs to be addressed promptly before it harms the business.
Improving the purchasing and/or accounts payable process will address the risk of duplicate payments, and automated purchasing and accounts payable solutions can be a significant help here.