If you’ve worked in Accounts Payable, you know how easy it is to miss-key invoice details, submit multiple entries for the same invoice, and deal with lost discounts due to inefficient approval processes. Even the slightest detail, such as an extra digit in the dollar amount, or a transposition of numbers, can result in unnecessary cash leakage.
The fact is, when any type of manual effort is involved with the submission, review, or approval of an invoice, there is room for human error. Even the best ERP system controls, coupled with automatic approval processes and post-payment sample auditing, won’t catch every duplicate payment, over-payment, or payment to a wrong vendor. Despite your best efforts to implement preventative controls, your organization is likely still leaking cash. Here’s why:
Preventative Controls Aren’t Enough
It is unrealistic and inefficient to expect internal audit and AP departments to manually sift through invoices looking for potential duplicates. The human eye can’t catch everything that can go wrong.
While ERP systems can flag an exact duplicate, built-in controls are easy to circumvent. Whether it is by accident or intentional, you will be likely be paying for an invoice twice when a typographical error is made, a vendor sends out an invoice to one person and a statement to another, or you are even a penny off when entering the invoice amount.
Common Trouble Spots in the AP Process
Even the best-run AP departments are prone to mistakes. However, controlling cash leakage becomes even more difficult in cases where invoices are received through multiple channels and locations, paid with multiple methods, or when vendor master records are less-than pristine.
One of the most common causes for duplicate payments is duplicate vendor records. ERP system controls will detect duplicate entries with the same vendor number, but not if they are entered on multiple vendor numbers. It is important to keep your vendor master clean and limit who can update it.
Why Auditing and Compliance Technology is Better
When any manual process is conducted, mistakes can happen, operating procedures can be bypassed, and cash leakage can result. Software powered by artificial intelligence (AI) can help stop the leakage. Here’s how:
- Using fuzzy matching, invoices that closely match are easier to spot. More effective than exact matching, similarity analysis is applied to invoice numbers to identify typos and transpositions.
- Identifying invoice outliers by vendor based on amount, currency, and frequency. This may 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.
- Duplicate vendor records are detected based on names, addresses, tax ids, bank accounts and other attributes.
- 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 root causes of errors so you can address them directly, while determining how to tighten controls and processes at the same time.
The Right Technology Can Save You More
Current controls used today by AP departments are not enough. Perfection is never possible, especially when it comes to human behavior. The right technology can make all the difference. The right software solution will enable you to prevent duplicate payments before they are paid by combining and analyzing data from multiple payment platforms and providing tools to build a strong audit trail. This enables better visibility into duplicate invoice submissions and other AP errors, detecting cash leakage, fraud, and misuse so they can recover funds.