How to Avoid Duplicate Payments in Accounts Payable Processing

Small, large, and medium businesses face a significant issue is duplicate payments in accounts payable processing. This issue is undeniably a considerable problem that AP teams face, and the good news is the duplicate payment issue is resolvable.

Meaning of duplicate payments 
It is crucial to understand the meaning of duplicate payments. When does a duplicate payment happen? – It happens when the finance team pays the same vendor twice for a commodity. The issue of duplicate payment is a major one because businesses can lose a lot of money.

However, the impact of this duplicity varies from company to company. APQC (American Productivity Quality Center) research showed that duplicate payments comprised 0.8% of total disbursements for high-performing companies, and duplicate payments included 2% of total disbursements for lower-performing companies. So, this payment challenge has a more significant impact on low-performing companies.

Avoid duplicate payments in AP processing: A step-by-step guide

Follow these steps to overcome and avoid this significant payment challenge:

1. Integrate and validate your file data

The very first step to combat the issue is to consolidate the file data of your business and verify its accuracy. Scrubbing your VMF (vendor master file) is vital, and it’s essential to take the time for scrubbing duplicate payments. The master file of vendors can be available in the systems you use. Even if you’re busy, hiring an intern to do this is enough.

2. Deactivate the duplicate vendors

Often, businesses make duplicate payments because the same vendor mentions more than once in the VMF. So, make sure that you deactivate such vendors. Checking the VMF to check for vendors for a single payment or never paid in the last year to a year and a half and deactivate those names.

3. Standardization of data entries

Another issue that contributes to duplicate payments is data showing up inconsistently within the VMF, and the inconsistency creates a lot of confusion and mess. So, it would help if you standardized data entries by setting up standard labels for the various types of vendor information.

Using the same labels leads to better accuracy. For instance, while scrubbing your VMF, you may find two tags for the same company (e.g., The Coffee Company and Coffee Company). Just choose one label from the two variants and use it throughout the VMF.

4. Request your vendors for W9/EU relevant tax details

At the beginning of your business relationship with a vendor, provide every vendor with filled-out EU/W9 relevant tax forms. This form will help because contractors that work for different businesses (like freelancers) generally use the W9 form in the USA to verify their TINs (Tax Identification Numbers). It would help if you had these TINs or relevant tax identification numbers in your geography while filling corporate tax forms.

5. Verification of tax information is essential.

Verification of the tax information of your vendor is vital. For the same, you can contact your relevant taxation department. It would be best to match your vendor’s tax identification numbers with the government’s site tool for checking tax identification data. In this way, when you file your company’s tax returns, it’s already double-checked to ensure the vendor’s TIN matches the records of the tax department.  

6. Scrub your company’s VMF annually

Updating and cleaning your company’s VMF regular is instrumental in avoiding duplicate payments. Dedicating the time to do this will help you identify inconsistencies and potential duplicate costs in your VMF.

You can also use automated invoicing systems that provide greater visibility into invoices, vendor payments, and other financial transactions. You can also save more time by downloading invoices automatically from various sources using GetMyInvoices.

Remember these steps and implement the same to avoid the duplicate payment challenge in AP processing.