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The Costly Duo - Duplicate Payments and Incorrect Vendors
Payment errors, a common issue in financial transactions, can erode an organization's resources and relationships. This blog post explores two prevalent payment errors – duplicate payments and payments to incorrect vendors – their causes, consequences, and strategies for prevention.
Duplicate Payments: A Costly Oversight
- Data Entry Errors: 22% of duplicate payments result from manual data entry mistakes (APQC).
- Poor Invoice Tracking: Only 31% of organizations have dedicated teams for invoice reconciliation (Hackett Group).
- Insufficient Controls: While many accounting systems have controls to prevent duplicate invoices, these controls are often misconfigured or misused.
- Financial Loss: Many vendors will accept duplicate payments, apply them to other invoices, or not even realize the overpayment occurred.
- Administrative Burden: Resolving duplicate payments entails hours of vendor contact, follow-up, and recordkeeping.
Payments to Incorrect Vendors: A Risky Mistake
- Similar Vendor Names: With thousands of vendors to manage, similar vendor names will happen often.
- Data Entry Errors: 33% of payment errors occur because of simple human errors in data entry (Hackett Group).
- Lack of Verification: 40% of businesses lack a robust verification process for vendor information (Basware).
- Loss of Funds: The cost of recovering funds from incorrect vendor payments can be thousands of dollars per incident (IOFM).
- Lost Time: Identifying and addressing incorrect vendor mistakes can take many hours of a team's time.
- Regulatory Risk: Tax filings and compliance control issues can raise significant consequences resulting from these errors.
- Automate Payment Processes: Reduce the risk of data entry errors with automation.
- Verification Protocols: Robust verification processes for vendor information and invoices can prevent errors.
- Vendor Master Data Management: Maintain a well-organized vendor master data repository.
- Periodic Audits: Regular audits reduce errors, inform future improvements, and help you find lost funds.
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