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

Causes

• 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

Causes

• 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).

Consequences

• 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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