Duplicate payments can happen to the best of us. With the amount of work accounts payable teams have to get through in a typical day, it's no wonder that duplicate payments make up at least 1–2% of all payments made by most organizations.
While it might not happen every day, those duplicate payments can cost your business thousands of dollars if not more. This post explains what you need to know about duplicate payments, including 4 simple tips to help prevent them.
What is a duplicate payment?
A duplicate payment is when a company pays the same bill more than once. It can happen by simple accident but it can also be a sign of fraud.
Examples of accidental duplicate payment:
- Your check is still in the mail when a vendor sends a second copy of the same invoice, and your AP team pays it again
- The AP team accidentally resurfaces the same invoice because it wasn’t filed correctly after payment
- The same invoice is forwarded to two different managers in different departments, and they both pay it
Examples of fraudulent duplicate payments:
- A bad actor sends your AP team a familiar monthly bill in a familiar format with a new payment address, and they pay it without investigating the change
- A bad actor at a trusted vendor sends a second, exact copy of a legitimate invoice and pockets the extra payment
- A disgruntled employee pays several invoices twice on purpose, then calls the vendors to request a refund and pockets the checks they send back
No matter how it happens, paying a small invoice twice might not feel like a catastrophe, but tack on another zero or two, and those duplicate payments can be enough to keep a CFO up at night.
How does a duplicate payment occur?
Although it’s easy to blame simple human error, the real causes of duplicate payments usually come down to a lack of internal controls. Mistakes in the invoice data entry phase aren’t caught, and each person in the chain blindly trusts that the information they’re being handed is correct.
Cleaning data, implementing fixed payment processes, and leveraging payment automation can alleviate these types of issues.
With just a few changes to your business processes, you can improve your cash flow and better manage your expenses, especially when you remove inefficiencies at the same time.
For example, in the process of manual data entry, your accounts payable staff:
- Chooses a paper invoice from a file
- Reviews each field in the invoice
- Enters invoice data from each field into a new document
- Ideally, compares the retyped data to the information in an underlying purchase order (PO), contract, or other documentation
- Closes the file and starts on the next one — invoice after invoice after invoice
Tedious and repetitive tasks like these can lead to fatigue and error-prone work.
Other common reasons for duplicate payments include:
- Duplicate invoices from vendors (whether accidental or otherwise)
- Duplicate vendor listings in your system under different names or addresses (so you don’t realize you’re paying the same company)
- Data entry errors where payments aren't recorded at the time of disbursement or the wrong invoice amount is entered
What are the risks of duplicate payments?
Some risks of duplicate payments include:
Loss of money
The first risk of duplicate payments is the financial one. If overpayments aren’t corrected, your company could face serious losses, including the cost of additional audit services from an external audit firm. Companies have been known to lose up to $12,000 in a single month just on duplicated payments.
Loss of time
The second risk of duplicate payments is your AP department’s time. Even if the duplication is eventually caught, fixing the accounting error and working with a well-intentioned vendor to get your money back takes hours out of your day that you just don’t have.
Plus, it’s likely to trigger a wider internal audit to see how many other duplicate payments might have gone out over the past year or more. That represents a tremendous new hassle for your whole team.
Loss of trust
Other losses aside, duplicate payments and subsequent recovery audits or check requests can lead to strained relationships with your vendors and suppliers.
Discovering the pain points in your accounts payable process is crucial, and errors can be minimized with accounts payable automation software.
How to detect duplicate payments
A lot of businesses use enterprise resource planning, or ERP systems, to oversee the AP process, but that’s not always enough — especially since your accounting software might only be reconciled once a month based on transactions downloaded from your bank.
By the time that duplicate payment has come out of your bank account, it’s too late. And paper checks only make things worse, sometimes clearing several weeks later.
That’s one reason why a bill pay platform like BILL can be so useful. It automates the manual data entry process, checks for invoice duplication, and registers each payment at the time it’s made, updating your books automatically.
How to fix duplicate payments
So how do you handle duplicate payments?
If you have a good relationship with your vendor — and if that vendor has their own excellent accounting practices — a simple request may be enough to get a refund. Depending on the circumstances, they could send you a check or agree to mark your next invoice as pre-paid.
If you don’t have a long-standing relationship with the vendor or they’re unable to verify the duplicate payment, you’ll have to decide whether the amount lost is worth the potential cost of a recovery audit.
Here are 4 best practices your accounts payable department can follow to help you avoid sending duplicate payments.
1. Ensure vendors aren't listed twice
During invoice processing, your AP team should only pay vendors that are already in your system. If a vendor isn't listed, don’t be too quick to add it.
Carefully check your vendor master file to see if the vendor is listed under a variation of their name, a misspelling, or a parent company. For example, Google is part of Alphabet so the company might be listed under either name.
For new vendors, it’s a good practice to add them to your AP system when you first sign a contract or place an order rather than waiting until you get an invoice. That way, if you get an invoice from a vendor that isn’t in your system, it should be an immediate red flag.
2. Avoid using more than one source document
When you approve payments, don't use more than one source document. In other words, don’t make one payment from a vendor invoice, a second payment from a purchase order, and a third from a procurement approval.
Instead, stick to a single source of truth for each transaction and use one payment process that operates the same way for every payment.
3. Use a standardized invoice payment process
Adopt a single workflow for every invoice no matter how that invoice comes in the door. Whether it’s sent by snail mail to a department manager or emailed to your accounting team, every invoice should find its way into the same workflow.
Enter each invoice into a centralized system, double-check it for accuracy and uniqueness, and make sure it’s approved by the right personnel before payment.
Fortunately, that does not mean you have to accept a bloated, bureaucratic payment system.
With AP automation software like BILL, the manager who gets the paper invoice can snap a photo on their phone and upload it through the BILL app — and the accounting department can set up an automated inbox for those emails.
The system checks for duplicate invoice numbers. Clearly defined rules send each invoice to the right people for approval. Payments are held until all approvals are received. And a digital audit trail automatically logs every step along the way.
In the digital age, your payment system can enjoy the best of all worlds — centralized for better oversight, distributed for efficiency, and automated for scalability.
4. Leverage AP automation software
In a recent survey of over 350 scientists ,at least half of them believe that AI still won't be able to replace all human jobs even 120 years from now. In short, the best way to use tools like AI and automation isn't to replace human beings but to work in partnership with them.
BILL’s AP automation software opens invoices that arrive by email, reads them, and enters the data for your review. It checks for duplicate invoice numbers and flags potential duplicate payments. It also applies your designated rules to each invoice and either pays that invoice automatically or sends it to the right people for approval.
When you’re ready to make a payment, the platform offers several digital payment options, including ACH, credit card (whether or not your vendor usually takes credit cards), and international payments.
You can even pay digitally and have BILL send a paper check for you, so you don’t have to wait for that check to clear. And BILL syncs with most major accounting software, keeping your books up to date automatically. So you know what’s been paid, and when.
How BILL can help you avoid duplicate payments
To see how BILL’s AP automation can help you avoid duplicate payments while streamlining your AP process, watch a demo or start your risk-free trial today — no credit card required.
