- April 4, 2017
- Posted by: admin
- Category: AP Fraud, Vendor Fraud
It is astonishing how often accounts payable audits yield findings resulting from vendors submitting invoices with a previously used invoice numbers. Now to be clear, we are not saying the vendor is submitting duplicate copies of the same invoice, although that could be the case, what we are saying is that they use the same invoice number more than once on the same or different invoices. The reasons vary from carelessness to purposeful nefarious acts of fraud.
Perhaps more interesting than the duplicate invoice numbers, is the typical Accounts Payable (AP) department’s response; adding a character to the vendor invoice in order to process it. So, for example, a vendor submits invoice #1011 more than once, on the second or third submission (yes we have seen them use the same invoice number 7 plus times), AP will add an “A” to the invoice in order to process the payment. (Note: most accounts payable software will detect the same invoice number from the same vendor if it occurs more than once, warning the clerk that this invoice and number has already been used.)
We believe this approach opens a “Pandora’s box” of issues to include:
- Ownership of the invoice now that is has been modified. Is it really the vendors invoice? After all they will have no record of that modified invoice in their billing system.
- What if two clerks approach the situation differently? Perhaps one will enter the alpha with a space between the last number and one without a space (i.e. #1011 A and #1011A). Many systems won’t identify that as an absolute duplicate and will process the invoice multiple times! Similarly, one clerk may start at the beginning of the alphabet while others may start at the end. The variations are endless.
- Potential for duplicate payments.
Best practices are to rectify and reprocess incorrect activity rather than override them or create a dysfunctional and inconsistent work-around. They include:
- Simply return the invoice to the vendor, letting them know that the invoice number has already been used. This will put them on notice to exercise more care in the processing and submitting of invoices, that is if they want to be paid timely…and we assume they do.
- Use purchase orders for each service for which you will be billed. With this option, once the first invoice is matched against the open PO the funds are decremented and the submission of the second PO will result in an exception type message notifying the AP clerk that there is an issue, which will hopefully be resolved and corrected.
- Monthly financial reviews and periodic audits of accounts payable activity. Either of these two solutions, while not preemptive in nature will at least potentially identify duplicate payments or invoice anomalies which require research and corrective action.
- Complete and thorough training. The Achilles heel of all organizations, as well as the great asset are its people. The well trained employees will pay for themselves and add tremendous value to an organization. The poorly trained ones will cost you more than you can imagine.