Duplicate Payments: Best Practices to Prevent Them
Elizabeth Allen 
February 2nd, 2022
Running an AP department is stressful. Processing invoices is tedious work, yet it requires tremendous focus and attention to detail. And when AP teams miss payments, they not only rack up expensive late fees, but they also disturb the company’s cash flow. Unfortunately, missed payments aren’t the only thing that can go awry. Another common problem AP departments face is duplicate payments.
Below, we’ll cover what constitutes a duplicate payment, the causes of duplicate payments, and the best practices you can use to avoid them.
TABLE OF CONTENTS
- What Are Duplicate Payments?
- Common Misconceptions Surrounding Duplicate Payments
- Why the Increase in Duplicate Payments?
- What Are the Causes of Duplicate Payments?
- What Happens to a Duplicate Payment?
- Why Duplicate Payments Hurt
- Best Practices to Prevent Duplicate Payments
- What Can Workflow Automation Offer You?
- How MHC NorthStar Helps Prevent Duplicate Payments
What Are Duplicate Payments?
A duplicate payment is an additional payment made to a vendor that a company has already paid. The American Productivity & Quality Center found that one to two percent of payments are duplicates. While that doesn’t sound like much, those payments can really add up.
Imagine your company makes $1 million a year in vendor payments. This means up to $20,000 of those payments could be unnecessary, extraneous payments- money that your company could have allocated to product development or your valuable employees.
And in addition to hurting your company’s bottom line and the associated cost of recovering the funds, duplicate payments can be the catalyst for fraud. The damage done by duplicate payments can be far-reaching and hard to spot.
Common Misconceptions Surrounding Duplicate Payments
Many companies insist that they make no or very few duplicate payments. But per AP Now’s Mary Schaeffer, claiming you’ve never made a duplicate payment is “like saying you’ve never made a mistake. Everyone will make a duplicate payment at some point”. Duplicate payments are simply a fact within the accounts payable world… they can happen, they do happen, and they’ll happen again. Once you acknowledge the reality, you’re one step closer to reducing or even eliminating them.
Another misconception is around a vendor’s action once a duplicate payment has been made. Many AP team members assume that if a duplicate payment is made, vendors will do the “honorable” thing and return the payment immediately. In the best scenario, most vendors will apply a vendor credit to your account. A vendor credit puts the overage on your account and allows you to use towards future invoices. However, vendors aren’t always forthcoming about available credits.
Why the Increase in Duplicate Payments?
Mary Schaeffer of AP Now has noticed a steady uptick in duplicate payments within the past few years. Companies that previously experienced very few duplicate payments are seeing an increase and, due to lack of expertise in how to handle these situations, are rather confused as to next steps. There are a few reasons this practice would be ramping up.
COVID Craziness
As Mary has stated, duplicate payments tend to happen “in times of change and unrest”. And there has been no bigger example of a time of unprecedented change than our experiences when COVID-19 hit the scene. Across all industries and all companies, employees were sent home and were expected to successfully do their jobs outside of their typical work processes and with limited resources. Everything we knew changed within an instant. In the case of payables processes, so many invoices were previously coming in via mail. To work around that, companies were suddenly requesting invoices be sent through email. In the event where companies had employees eventually pick up paper invoices from the office, it put companies at risk of paying both the paper invoice and the subsequent email invoice.
Increase in ACH payments
As people realized the importance of electronic processes when COVID changed the game, companies previously making payments via check demanded to switch to ACH payments. Electronic payments certainly give a company the ability to make payments more quickly, but the increase in demand for this option across the board created unexpected roadblocks. It was a great lesson in the idea that initiatives to improve processes should be made during times of calm- not in the middle of an existing crisis. While your team and the vendor work out these kinks, the resulting disruption is likely to lead to paying an invoice more than once.
Sluggish US Postal Service
Changes to processes and policies within the USPS in 2021 created longer delivery times for packages and mail across the United States. Slower mail delivery times equate to invoices and checks arriving later than previously experienced. So, while you may be processing the payment or the payment is on its way to the vendor, once the due date of the invoice hits, the vendor is perfectly within their rights to resend the invoice. This causes confusion amongst AP teams as the invoice copy can be viewed as an entirely new invoice and paid as such. Resulting in yet another duplicate payment.
More Email, More Duplicates
The average office worker receives 121 emails a day. That’s a lot of content to sift through in a single inbox. So, it’s easy to see how the proliferation of email as a method of communication can easily cause chaos within an AP team. And in cases where vendors send the invoice separately to two different teams within your organization, the risk of a duplicate payment rises exponentially.
What Are the Causes of Duplicate Payments?
According to AP Now, companies receive duplicates of approximately 25% of their incoming invoices. Multiply that by the number of touchpoints during the payment process- it’s actually a miracle most payments aren’t duplicates. Accounting for situations like when a vendor is asked to send an invoice to both AP and Purchasing, Mary Schaeffer finds that a lot of the issues with duplicate payments result from a lack of communication across internal teams.
Duplicate payments can arise for many reasons, both unintentional and intentional. Identifying them early is the best antidote to this issue but requires the type of extra manpower that accounts payable teams rarely have available. However, to keep an eye out for potential duplicates, it’s best to know the various causes.
Duplicate payments can arise for many reasons, both unintentional and intentional. Here are a few typical causes:
1. LACK OF STANDARDIZED ACCOUNTS PAYABLE SOPS
There is a much lower likelihood of duplicate payments when all employees follow the same set of rules. Without standard operating procedures (SOPs), it’s easy for employees to get confused or even negligent. Instituting SOPs can help avoid inattention, costly discrepancies, and more.
2. HUMAN/DATA ENTRY ERRORS
When AP teams manually enter hundreds of invoices a day, they’re bound to make mistakes. A momentary lapse in concentration can lead to miskeying, like typing “O” instead of “0” or “72” rather than “27.” Basic ERP validations won’t catch minor errors like these and can cause a whole host of issues down the line.
3. LACK OF CENTRALIZED DATABASE
When a company doesn’t have a centralized database, employees are constantly sifting through emails, attachments, and physical pieces of paper to figure out which invoices have been paid and which haven’t. Not only is this inefficient, but it also increases the chances of human error that can lead to late payment charges and duplicate payments. A well-maintained database, on the other hand, makes searching for invoices, identifying which ones have been paid and monitoring cash flow much simpler.
More importantly, with the major shift in employees working remotely, entire AP teams may no longer be in the same physical location. Therefore, a centralized database is literally the only way for team members to access the information required to perform their duties.
4. DUPLICATE INVOICES
It’s tough to distinguish copies of invoices from originals, especially if they are sent as a PDF. Would-be scammers know this to be true, so they attempt to send fraudulent invoices hoping that the AP department won’t notice. Generally, most duplicate invoices aren’t born out of such nefarious circumstances. Instead, AP team members themselves might accidentally create duplicate vendor accounts and send payments to both.
For instance, one person on the AP team might enter “Armstrongs Commercial Insurance” (note the lack of apostrophe) when an invoice comes in and immediately pay that vendor. But because the actual name of the vendor is “Armstrong’s Commercial Insurance” with an apostrophe, the vendor never received that payment, so they send a notice of late payment a few weeks later. A different team member sees that notice and pays the invoice right away to avoid more hefty fees. As a result of this one missing apostrophe, the company has paid both the real vendor and the misspelled one.
5. LACK OF SET APPROVAL PROCESSES
Without checks and balances, companies can’t prevent unauthorized payments or payments made outside of the standard process. Strict approval processes significantly reduce the chances of duplicate payments. Automated approval processes take this to the next level, validating that payments are legitimate, and accommodating rush payments if necessary.
When Are Companies Most Likely to Make Duplicate Payments?
Along with times of uncertainty, there are other situations that can cause a company to see an increase in duplicate payments. System upgrades, moving to a different ERP, the implementation of new technology, and welcoming new hires – all can be the catalyst for invoices being paid more than once.
During these moments, it is beneficial to do regular one-off audits as invoices flow through the process- to ensure that payments aren’t being duplicated out of multiple systems or caused by team members unfamiliar with your organization’s payment practices.
Watch Our Webinar on Duplicate Payments
Vendors don’t automatically return duplicate payments, so preventing them entirely is your best option. Find out how from our guest speaker, AP Now’s Mary Schaeffer! Register to watch the webinar recording!
What Happens to a Duplicate Payment?
So, an additional invoice has made it through all your fail-safes, and you realize a duplicate payment has been made in error. What next? What happens now that the extra payment is in the hands of your vendor? There are two potential outcomes to the inadvertent creation of a duplicate payment.
A Tale of Two Outcomes
The best-case scenario is when the payment is returned directly to the payables team. The vendor recognizes that you made an extra payment in error and simply sends the check or payment back. The payment can then be voided and removed from your positive pay file. In this situation, always be sure to document, document, document.
As most audits are typically done a few years after a payment has been made, an adequate recording of this situation will save you when unclaimed property auditors inquire about the voided payment. Not only is the reason for a single overpayment difficult to remember for any AP team member, but it’s also possible that personnel changes might mean that the person who made that payment is no longer with the company at the time of the audit.
A less preferable situation is when the vendor returns the payment to management. Mary Schaeffer has shared anecdotes of the supplier bringing the duplicate payment straight to management, causing some issues with management’s view of AP’s reliability. Not the preferred outcome of any overworked staff member.
The Common Compromise
Oftentimes, instead of having the payment returned, the vendor will give you credit on your account to be applied to future invoices. This can be very useful when it comes to regular, recurring purchases- where you know you’ll absolutely be doing business with this company again in the near future. It becomes a less beneficial solution when it is a vendor with which you do sporadic business or have no intention of purchasing from again.
Vendor Credit Education
While vendor credits can be useful, one of the biggest obstacles with this resolution to a duplicate payment is simply understanding that the credit exists and how to use it. Staff must be trained on how to identify existing credits and when and how to ensure that credit is being properly exchanged for future goods or services. This is especially important when adding staff to the payables team. Make sure new and veteran team members alike know precisely how to recognize a vendor credit and what to do with it.
Regardless of how you discover the duplicate payment, the main point is to figure out what happened to cause it in the first place. According to Mary, “…you want to go back and close the loophole that allowed that duplicate payment to occur. Because it’s one thing to make a mistake. It’s another thing to repeat it.” Each time a duplicate payment has been discovered, make it a priority to do a little investigative work to determine what caused the oversight and adjust processes or provide additional training accordingly.
Why Duplicate Payments Hurt
Simply put… each extra dollar sent to a vendor in error is money that isn’t appearing on your company’s bottom line. This could impact future budgets along with your organization’s ability to have a true understanding of their financial position.
In addition to those dollars no longer being in possession of your company, the cost of recovering funds (in the form of staff time and outside audits) is an undeniable drawback to any duplicate payments being made. Either way, it will cost money to retrieve those extra payments- a reality most AP managers would like to avoid. And neither of these account for the fact that duplicate payments could open your organization up to fraud.
As Mary Schaeffer puts it “Sometimes fraud starts with an honest mistake”. You inadvertently make a duplicate payment and some less-than-trustworthy vendors could view that as proof that there are holes in your process and take advantage of that- sending invoice copies in the hopes of receiving extra payments for the same product or service.
Questionable Vendor Practices
While a strong vendor relationship is the ultimate goal for most accounts payable teams, vendors are made up of groups of humans and therefore the situation is open to some behavior that could be deemed less than ideal. For organizations hoping to reduce their duplicate payments, one thing that can be done is to keep an eye out for things vendors might do that could generate an extra payment.
CHANGING THE INVOICE NUMBER
Some vendors will change the invoice number on copies of the invoice (for example: adding an “A” to the end of the original invoice number), thereby making it much harder to check that your company has already received this invoice.
SENDING A SECOND INVOICE
Another tactic is to send a second invoice on or near the due date. While a vendor is within their rights to send another invoice once the due date has passed, some vendors push this by sending it prior to the due date- using the excuse that you were close to the due date and therefore were likely going to be sent a duplicate invoice anyway.
INTIMIDATING THE AP STAFF
Lastly, and most frustratingly, some vendors will try to intimidate organizations by calling up AP staff and berating them, making claims of historical late payments. A flustered and busy AP team member might be more apt to quickly make a payment to quiet the screaming vendor, not realizing that the payment is on its way to the vendor as they speak.
As Mary Schaeffer warns: “When a vendor is screaming, you want to take a look at why they’re screaming. Are they legitimate? But don’t automatically fold because they might be playing games”.
How to Deal with Vendors
Regardless of how well-honed your processes are and how well-trained your staff is, sometimes you’ll find the best way to avoid duplicate payments is to cut them off at the source. The vendor. Many times, where the process went wrong was before your team even received the invoice. And while it’s more difficult to manage a process you don’t own, there are ways to convince a vendor to work with you to reduce duplicate payments.
The first step is to reach out to vendors sending copies of invoices and politely ask them to stop. While they are allowed to send copies after the due date has been reached, there are many vendors who send copies out in advance of the due date- hoping to nudge your AP team to make that payment quicker.
And if the vendors need a reason to stop sending duplicates, letting them know that each invoice copy could delay payment overall will often entice them to stop this particular practice. Make them aware that each extraneous copy of an invoice could result in days of research on your end that will ultimately slow down their payment.
For vendors with a sordid history of sending duplicate invoices, creating an ACT (Always Thoroughly Check) list might be the way to go. Adjust your process so that invoices from those specific vendors are held for a few days before processing, to require a mandatory check against any duplicate invoices. This will ensure that you will have fewer duplicate payments to vendors who are known to send invoice copies in advance of the due date.
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Best Practices to Prevent Duplicate Payments
Although there are many ways duplicate payments can occur, there are also plenty of ways to protect your company against them. Implementing the following best practices is a terrific start:
1. SEPARATION OF DUTIES
As Mary Schaeffer says “Appropriate separation of duties trumps everything. Or else you open yourself up to a lot of practices… including the possibility of fraud.” She goes on to state that “You should be using appropriate and strong internal controls across your whole AP, P2P, treasury, and account functions. NO EXCEPTIONS.”
Separation of duties acts as the number one checks and balances across the organization. No one person is responsible for the process across the board, making it more complex for an employee to engage in nefarious practices that might constitute or lead to fraud. It has been discovered that internal fraud generally is committed by long-term, trusted employees. Ensure that there are no dark corners of the process where things can go unaccounted for.
2. STANDARDIZE YOUR PROCESS
According to AP Now’s Mary Schaeffer, the most crucial part to eliminating duplicate payments is creating a consistently and widely followed process. Ensure that everyone does everything the same way. In the event that a staff member finds a more creative or efficient way of doing something, analyze the new system and determine if it’s beneficial to roll it out to the entire team. If not, the staff member should return to the originally outlined process. Per Mary: “Consistency is the overriding principle”.
The trick to ensuring consistency across the process is to provide regular and adequate training. Whether it be for new hires or to refresh existing team members’ understanding of the process, be sure to provide training often. As Mary says: “It’s better to overtrain than to undertrain.”
3. REQUIRE PO NUMBERS ON INVOICES
Insisting that all invoices include purchase order numbers is one of the easiest ways to dodge duplicate payments. With PO numbers available, AP teams can sort invoices quickly and perform a three-way match. Three-way matching ensures that the order amount, vendor name, and products and services rendered are the same on the invoice, purchase order, and receipt. This makes it nearly impossible for duplicate payments (and other issues) to occur. Non-PO invoices are not suitable for three-way matching, which makes them more difficult to process. These types of invoices can easily lead to duplicate payments, so it is best to avoid using them.
Discover the Differences Between POs and Invoices
4. UTILIZE A CENTRALIZED LOCATION
Per AP Now’s Mary Schaffer, the trick to this is “One postal address. One fax number. One email address”. Once a new invoice comes in, it will be properly routed through the invoice process to ensure it is correctly paid.
Ask your vendors to send invoices to one place that your entire AP team can access and search. If the vendor happens to send invoices through the mail, make sure that it goes to one, very specific address (for example: don’t use 123 Main St. Have the address include elements such as the company name, a department name or floor, an attention line, or even a separate PO box).
Typically, the centralized location for invoice receipt is an email address that the AP team manages, like invoices@companyabc.com, or a database created in a workflow automation tool. An email address may be easier to set up, but workflow solutions have more functionality to enable automatic routing for approval, payment reminders, and payment scheduling. Mary suggests that AP teams avoid using the email address of individual employees, as unexpected absences or employee turnover could cause obstacles to accessing those invoices quickly.
And to account for the vendors who still demand invoices be sent via fax, set up a single fax number to manage those incoming invoices. Better yet, marry that fax number to an e-fax facility- giving your team the option to generate an electronic version of the invoice that can then be emailed or processed through an automated system with the convenience and ease of an invoice received via email.
5. ESTABLISH CHECKS AND BALANCES TO REDUCE HUMAN ERROR
Employees do their best to enter information carefully, but having a system that catches miskeys and duplicate entries adds another layer of protection. Many workflow tools have features that automatically notify team members of potential errors as they work, minimizing the chances of duplicate payments.
6. SIMPLIFY THE APPROVAL PROCESS
Approval processes get a bad rap because often they’re too lengthy and hinder operations. Your approval process should be extensive enough to detect possible duplicate payments (and other issues) but not so cumbersome that it deters employees from actually using it.
When implemented correctly, your approval process will allow your team to be more nimble. For instance, a supplier calls stating they need to change their payment date. With a solid approval process, the AP team can quickly access and review the payment terms, know which managers to contact for approval, confirm the new due date with the vendor, and update it in the necessary systems.
7. HAVE HUMANS APPROVE INVOICES
Automation is an important part of the AP workflow, but human activity is too. Humans should approve all invoices before they are paid to ensure to avoid duplicate payments and any final mistakes. Thankfully, workflow automation can automatically route invoices to the designated person for quick approval. This ensures that invoices are reviewed by human eyes without creating delays. As a final step, make sure to mark the invoices as “paid.”
8. STOP DUPLICATE INVOICES
While it might not work for all vendors, sometimes simply requesting that they stop sending duplicates will keep them from confusing matters with copies of invoices. According to Mary Schaeffer, warning vendors that duplicate copies could create delays in their payments might be enough to stop that practice. In situations where vendors have a history of sending duplicate invoices, create an ACT (Always Check Thoroughly) list. This solution will require that the team hold onto an invoice for a few days as you check against any potential duplicates.
9. PAY ON TIME
While requesting vendors stop sending duplicate copies of invoices might resolve the issue of duplicate payments, know that once the due date has arrived, the vendor is fully within their rights to send another copy of the invoice. Optimizing your payables process so you pay invoices on time eliminates the possibility of receiving invoice copies as vendors try to nudge you into making the payment.
10. PAY FROM THE ORIGINAL INVOICE ONLY
Copies of vendor statements look very similar to an invoice, but as we know, they are not the same thing. In fact, they are a recipe for duplicate payments. Some workflow automation systems have technology that can catch duplicate invoices, but it’s always a positive to train your AP teams to make payments exclusively from original invoices and inside of the established workflow.
11. AUDIT FOR DUPLICATES
Regularly perform audits on your process. This can either come in the form of a self-audit, or you can hire a 3rd party audit firm. Either way, begin the process with a statement audit. As Mary Schaeffer refers to it, the “low hanging fruit” is the act of requesting from your vendors a statement of all open activity (not just invoices). From there, you can utilize software such as Excel to perform conditional formatting and pivot tables- identifying any duplicate payments that were made in error. The audit will also allow you to identify any vendor credits you may not have yet recovered.
12. IMPLEMENT PROCESS AUTOMATION
In this day and age, many robust tools can help you automate the AP process, fit it to your company’s unique needs, and impose the above best practices. When done well, automation can reduce human errors, standardize processes and approvals, catch duplicate invoices, and more.
What Can Workflow Automation Offer You?
The thought of making duplicate payments is another stressor atop the AP department’s already high-pressure job. And no matter how careful employees are, they’ll make mistakes from time to time.
That said, there are always opportunities to improve your process and eliminate risk factors for duplicate invoices payments. By combining standardized operations, centralizing data with a SaaS solution, and requiring robust approval processes, duplications can become a problem of the past. And the ability to automate your workflows with drag & drop functionality is the best way to quash duplicate invoices and payments once and for all.
MHC NorthStar is a powerful workflow automation platform that eliminates both invoice and payment duplication. Remove the worry of bothering a valuable customer with extraneous invoices, causing confusion and jeopardizing the relationship. Reduce the need to constantly have to double-check that you haven’t accidentally overpaid a vendor, costly mistakes that can potentially impact your organization’s bottom line. And wave goodbye to the threat of being a victim of fraud.
Taking advantage of duplicate invoice and payment detection technology, MHC will keep you from the stress of having to explain your boss or auditors “what exactly happened here?”. The best part is that MHC NorthStar is fully configurable: power users can dictate who should be notified of a duplication, what their next steps should be, and enforce those next steps within the solution itself.
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How MHC NorthStar Helps Prevent Duplicate Payments
According to Mary Schaeffer “Automation is great for weeding out duplicates and it does it fast and cheap and easier than people. Your automation solution won’t make coding errors and it can analyze all your data while many of us are limited by their time and resources and will only look at part of it. And best of all, it frees up your people to work on more value-added tasks”.
Automation simply removes the human error so prone to generation duplicate payments. With MHC NorthStar’s upfront duplicate invoice detection, you will no longer rely on conditional formatting and pivot tables within an Excel document to manually ensure an invoice hasn’t already been received.
And with the built-in duplicate payment check, MHC NorthStar acts as yet another set of eyes for your AP team. Both functions powered by AI, checks for duplicate invoices and payments can be performed immediately and in real-time without exhausting valuable resources.
If you were interested in the gems from AP Now’s Mary Schaeffer sprinkled throughout this article, you might have your curiosity piqued to learn more by watching our recent webinar on duplicate payments. Watch today and gain valuable insight into the scourge of duplicate payments while discovering concrete steps you can take to eliminate this pesky drain on staffing, resources, and finances forever.
WATCH THE ON-DEMAND WEBINAR TODAY TO LEARN HOW DUPLICATE PAYMENTS CAN BE ELIMINATED FROM YOUR DAY.
