A Guide to Eliminating Duplicate Payments and Recovering Funds

Many finance shared services organizations are under pressure to improve KPIs and reduce errors which hurt the bottom lines of companies. For many, one area of low hanging fruit is duplicate payments. While many shared services organizations have made huge strides and improvements to their processes that have reduced the rates of overpayments, the best shared services organizations realize that you should never be satisfied with your current processes, and you should always be looking for ways to add value to the business.

However best practice in procure-to-pay, means going beyond duplicate payments and not only reducing errors that originate within your shared services, but finding errors caused by your suppliers. With proper root cause analysis, you can move more cash to your bottom line and avoid costly re-work.

We have put together some tips for shared services professionals, whether you are a mature shared services or just starting up, to make sure your payment system is watertight.

Investing some time and energy into these projects may not cost much to implement, are likely to pay off in time:

• Invest in your Master Data. Maintaining high quality Master Vendor Data often slides to the bottom of the priority list in shared services organizations. However, good data is a backbone of good process and the ability to get things right the first time.  Poor vendor data can lead to invoices being sent to incorrect addresses, and often leads to payment errors, late payments or duplicate payments. Make sure someone in your organization is invested in owning the quality of data and is rewarded when it is improved and well maintained.
• Standardize processes and install policies such as ‘No PO, No Pay’. The only way organizations are able to drive down the cost of KPIs such as First time Match and Cost per Invoice rate is when the Purchase to Pay department has standard processes that are well understood and stuck to. If you have standard policies that insist on Purchase Orders (No PO, No Pay) you will reduce the rates of duplicate payments and be able to identify errors quickly.
• Automate as much as possible. Technology such as e-invoicing and supplier portals can make a big difference to reduce errors that occur from manual entry. In addition, electronic and scanned copies of invoices, rebates, warrantees in your system will make finding money owed to you easier and can help you in case you are trying to recover money owed to you from suppliers. Also, be sure to check if your ERP is already running duplicate payments checks, and if you use an outsourcer, ask them what their process is to check for errors and duplicate payments.
• Solicit statements from your suppliers. When was the last time you asked your suppliers for statements, checking to see if they owe you any money or for any open and available credits? It can be a time consuming task, however if there are payment errors that have occurred which originated from your suppliers, you might not even know if they owe you money from issues such as rebates or returned goods.
• Make recovering credits a continuous policy. While many shared services invest in third party solutions such as audit recovery firms every few years, you may not be catching everything. Credit notes expire, and if there is money that you are not catching between audits, who knows how much you could be missing out on? Consider using a Vendor Credit Recovery service that can review the accuracy of your suppliers’ accounts receivables on a regular basis, looking for open and available credits. Vendor Credit Recovery, a term trademarked by JPD Financial is a process where a company will contact 100% of your auditable supply base to recover money owed to you. Using a specialist firm like JPD means that you don’t need to make the costly and time intensive investment in recovery. These firms typically charge a percentage of what they recover, meaning there are no up-front costs to your company, and it can only add to your bottom line.

While there are many best practices you can follow to ensure there is no ‘leakage’ in your procure-to-pay process, there are other areas which are much more efficient to outsource. Activities such as soliciting statements and auditing your supplier base can often be done much more efficiently by a third party, keeping your resources laser-focused on the day-to-day and business-critical operations.

So when was the last time you investigated the testing the integrity of your accounts receivable data? If your shared services are under pressure to achieve more savings, and deliver a higher quality service, what are you doing to improve your end to end payments process?

If you are interested in making sure your payment processes are watertight and you recover funds owed to you, invest time in these key areas, and if you want more information on Vendor Credit Recovery, download an article we produced with JPD Financial, 7 Questions to Ask Recovery Firms.