Duplicate invoice payments occur far more often than most realize, resulting in cash leakage. It’s estimated that companies make duplicate payments at the rate of 0.1% up to 0.5%.
That may not sound like a lot. However, a company with annual payments of $500 million could be leaking anywhere from $500,000 to $2.5 million annually. Most organizations simply cannot effectively review all their invoices given their resource capacity and manual control testing constraints.
Some companies believe because they are SOX compliant and use a leading ERP system, they’re not making duplicate payments. While ERP systems can flag an exact duplicate, it’s all too easy to circumvent these built-in controls, either accidentally or intentionally. You will be paying for an invoice twice when these common scenarios occur:
- You make a typographical error on the invoice number
- A vendor sends a second invoice with a different date
- You are a penny more off when entering the invoice amount
Even the best-run AP departments are prone to mistakes; we’re only human. Controlling duplicate invoice payments becomes even more difficult in cases involving numerous invoice receiving methods and locations, various payment methods, and less-than pristine vendor master records.
It is unrealistic and inefficient to require internal audit and AP departments to manually sift through invoices looking for potential duplicates. You simply can’t expect the human eye to catch all of the duplicate payments.
Instead, leading organizations are deploying automated risk detection solutions for procure-to-pay, like Oversight Insights On Demand®, to monitor transactions continually for duplicate invoices and duplicate payments. Oversight uses artificial intelligence (AI) to detect and resolve duplicates by:
- Finding invoices with invoice numbers that closely match. Fuzzy matching is more powerful for detecting duplicates than only using exact matching. Similarity analysis is applied to invoice numbers to identify typos and transpositions.
- Detecting duplicate vendors based on names, addresses, tax ids, bank accounts and other attributes. The presence of duplicate vendors in the vendor master is one of the top causes of duplicate payments.
- Identifying invoice and payment outliers by vendor based on amount, currency, and frequency. This could include invoices that are above average for a vendor, an increase in volume of invoices, and invoices for rounded amounts, which are typical among fraudsters.
- Flagging out-of-sequence invoice entries and off-cycle payments, including weekend and holiday payments. When an invoice payment is off schedule, it typically warrants further investigation.
- Identifying missing or incomplete vendor data and flagging vendors with invalid or suspicious addresses. Correcting missing information can be the easiest way to cut vendor risk. It also pays to look for fictitious vendors, for example vendors that match employee files.
- Highlighting vendor practices that create inefficiencies. By isolating root causes of errors, you can determine how to tighten controls and processes.
Better visibility into duplicate invoices and payments helps companies detect cash leakage, fraud, and misuse, so they can recover funds. Better yet, the right tool will enable you to prevent duplicate payments in the first place, while combining and analyzing data from multiple payment platforms and providing workbench tools to build a strong audit trail.
Demo Oversight to see how you can prevent and stop duplicate invoices and payments in your AP process.