Where can I find best practice information on researching duplicate payments?

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Do you have a system in which you can run reports?  Assuming you have some type of system to do reports, here are some reports that could be run and reviewed by a person to identify duplicate and invalid payments:

• Master file—a sort by tax ID is excellent (but most companies don't have tax IDs for all suppliers), so instead you could run by zip code to look for duplicates (not as accurate)
• Statement of account by each vendor record—look from highest dollar value down, review the account for:
     o Similar invoice numbers
     o Dates
     o Amounts
     o Look for invoices that "stick out" (For example: if you find invoice numbers 12345 and 12354, that could be a typo; or if invoice numbers are all are six digits but there is a number of different length (longer or shorter), it could be on the wrong account, e.g., if you have a column like this:
12345
23456
3456789*
45678
789*
67890
The starred invoices, which are not 5 digits long, could be invoices paid to the wrong vendor or keyed wrong and should be fixed.)
     o Invoice number:  internal dummy invoice numbers are created using the date: watch for different dates with same amounts
     o Amount review: Similar amounts—like $120.10 and $120.01—could be a typo; verify
     o Amount review: if amounts paid to the vendor are similar, but then there is one for a much higher amount—investigate the anomaly to see why, determine whether it is legitimate
     o Old credits—might have a keying error which is causing them not to clear on a check
• Run a dollar-only check report: Usually check runs have a rule to not print under $10.00 because of the cost (the assumption is when the next invoice is entered, both will pay). Sometimes small invoices never print; so run this report to clear the account once a month, removing the rule, and pay these suppliers; OR delete and pay on a P-card.
• Run an aged trial balance—negative dollars first to high dollars.
     o There are probably accounts in a credit status and there will not be any more invoices; AP needs to become an AR person and collect the monies from the supplier
     o Or the supplier owes you more than you owe them, and it is at least two months old; AP needs to call supplier and have them pay the credit and then the invoices will release           

It also requires asking suppliers for a full statement of their account: all credits, cash on account and aging invoices.  If you don't ask specifically for credits and cash on accounts, the suppliers may suppress them from the statements.

Of course, you want to build in audits before payments are issued. A duplicate check run can be done prior to payments, but it is better done as soon as the invoice is entered. If the invoice is altered in any way it must go back through the dupe check again.  

With that said, a pre-check register could be used; run top dollar down, ensure it was properly authorized and backup supports the payment. This reduces risk of fraud, mis-keys etc.

Manual audit is tedious and many items could be missed. The cost of the manual audit should be weighed against the third party recovery audit fee and the risk of what might be missed.  Have you considered a third party auditor?  No matter how diligent the person doing the review is, it is not perfect.  Third party RAs have a much more robust system, and third party recovery auditors know different industry standards that AP would never know.  

For example, here’s an actual case—a company was purchasing a reference book at $700.00 per book; once a buyer had purchased seven books, the rest were free, but AP did not know that and paid full price for more than 20 books at full price! A recovery auditor got the money back.  

Another area a recovery auditor can check is overnight package delivery services that are guaranteed to be delivered by specific times and the contract says if the package is delivered late, the delivery is free.  Again, AP cannot detect whether it was delivered on-time or not, but auditors can.

Most recovery auditors work on contingency—they are paid a percentage of what they find. Provided they also agree to inform and instruct you about their findings to enable you to take steps to correct processes, it is a worthwhile venture.

Finally, here are thoughts regarding AP self-audits, which accounts payable must conduct to remove errors and prevent fraud. Every transaction cannot be audited because it is not cost effective; so the degree of auditing has to be analyzed to determine what is in the company’s best interest. Also, it is critical to conduct the audits at various (including early) stages of the AP workflow to prevent wasted hours of work, only to reject the transactions.

For example if a duplicate invoice is caught after it has been fully processed and ready to pay, many hours have already been wasted processing that duplicate invoice. It is more beneficial to add a simple duplicate check process at the earliest stage of the invoice process, which is at the point of indexing. If the invoice number, date and amount match, it should be sent to an auditor to look at it more closely to determine if it is a duplicate or not. A second audit should be done again after the invoice has been processed, now including the supplier number in the mix. Extra care should be placed on searching the system for duplicates, as it is the number one non-compliance issue found by external audits.

The next audit should be after invoice processing but before payment. The auditor should sort the work first by due date and secondly by dollars. If there are any invoices that may hit the payment queue that night, they must be sure to have completed the audit. Suggested invoice audits to conduct:
• Review all invoices over a certain dollar (determined by company size)
• Review all invoices processed by a new employee until 98.9% accuracy rate is reached
• Review the balance of invoices are on a random basis (e.g., every ninth invoice).

The key to an audit is to not let the supplier or staff figure a way around the audit for the intent of committing fraud. That is why a random audit is absolutely necessary.

Management should randomly test the auditors to make sure they are not just approving the work to keep up with the volume, nor stretching the work to fill the day.

Also see this case study.

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