How to Prevent Vendor Overpayment

The most frequent mistake in a company’s accounts payable department is overpayment towards vendors, also known as duplicate payments. This most commonly happens in big businesses where there are many people managing payments, and it can quickly turn into a severe problem if not caught speedily. Because of this risk, it is imperative for a company to carefully keep track of all outgoing transactions. A duplicate payment is more likely to happen when there are multiple methods of payment available towards your vendors, so it’s key for your financial staff to keep a close eye on accounts such as these.

When a transaction which has already been made is overlooked and then paid again, this is called a duplicate payment. This is regrettably bound to happen even if the financial department holds structured and organized book-keeping in high regard. Duplicate payments are most frustrating because they cause a company to lose money regularly without reason. There are many checks and balances a business can put into place to keep this sort of mistake from happening.

The good news for companies who find their financial department has been making duplicate payments for an extended period of time is that there are payment recovery companies to help confirm overpayments as well as to get your money returned back to you. This sort of company comes with unique expertise and programs that will pinpoint duplicate payments which your accounts payable department has made. After confirming a repeat payment, the payment recovery firm then speaks to the vendor to get the overpayment amount back into your account. You hardly have to lift a finger when a payment recovery firm is involved.

Absolutely any person you entrust to deal with your business’ money should be highly qualified and trustworthy. Your company’s financial well-being hinges on the staff you’ve hired as well as the systematic checks being built into the very core of your accounts payable department. To minimize the risk of duplicate payments, there are a variety of great strategies you can structure into your company. In her book: "Essentials of Accounts Payable", p 64 & 65 Mary S. Schaeffer gives a few tips and techniques on how to stop duplicate payments:

How to Stop Duplicate Payments

• "Set up a policy for consistently creating invoice numbers for invoices without invoice numbers. The guidelines should include rules for logically creating invoice numbers. All personnel should be instructed on the invoice number protocol. The rules should not use dates by themselves or the account number.
• Establish a policy when paying from copies rather than original invoices. These procedures should include flagging payments made from copies and invoices over 30 days old. Require high-level approval for each such payment and pay only after a thorough search has been made of the paid invoice file.
• Maintain a log of all prepayments and deposits. Additionally, keep a copy of the contract or agreement in the paid invoice file. Managers should regularly review the payment history of those vendors that require prepayments.
• Eliminate duplicate vendor numbers. This is probably the number one cause of faxes and second copies of invoices getting paid. Time spent purging the master vendor file will reap big dividends. And, of course, there should be only one master vendor file.
• Create a better working relationship with purchasing. By obtaining a thorough understanding of the responsibilities of purchasing, you will be in a better position to resolve discrepancies and anticipate problems. Similar, if they understand the accounts payable process, they will be better able to take actions to avoid practices that inevitably lead to a duplicate payment."

Procure-to-Pay Analisys & Recovery

Consider a procure-to-pay analisys and recovery company like Bitts that will help you to recover duplicate payments that were made in the past.