THE TOP 5 WAYS TO PREVENT OVERPAYMENTS

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Accounts Payable Recovery AuditTHE TOP 5 WAYS TO PREVENTOVERPAYMENTS

Nobody wants to overpay, but it happens. Eliminating all instances ofoverpayment is possible, but at what price? Most issues arise from five commonsources. Address them and you’ll make a powerful and cost-effective impacton your organization’s accounts payable practice.#1 Invoice Numbering FlawsProblem:Focus on:The most frequent cause of duplicate paymentsoccurs when the same invoice is posted with twodifferent invoice numbers. The nature of this typeof error has evolved over the years but it’s still thetop offender. In decades past, handwritten invoicesor hand processing of them often led to the issues.Today, automated processes – feeder systems,e-invoicing, and spreadsheet uploads – haveeliminated many issues, yet today’s automatedera brings its own challenges. OCR systems canmisread handwriting too. And it’s still possible tokeystroke in errors such as inconsistent entry ofleading zeroes and use of characters such as thedash that are neither numbers nor letters. Finally,it’s easy for errors to arise across organizationswhen invoicing can have multiple points of entry.Standardizing invoice numbering across allinput platforms. Dis-allow entry of problematiccharacters such as prefixes or leading zeroesfor manual and OCR entries. Evaluate everynew point of entry to ensure conformance withthese standards. Establish standards to addressvouchers that don’t originate with a true supplier.Always keep duplicate payment checking in mindwhen creating standards for check requestsor other non-trade voucher documents. Entrystandards should be unique enough that, iffollowed consistently, a true duplicate would beflagged for that type of transaction.Once established, periodically re-evaluate as youidentify missed duplicates. A recovery audit alsocan help identify the kinds of historical duplicatesthat have been missed and provide insightsto define the most appropriate standards foryour organization. 2020 PRGX USA, INC. All rights reserved.

#2 Duplicates that Slip Through ERPProblem:Focus on:The issue of multiple systems feeding invoicesinto AP can be a complex one; unless theyare continuously verified against ERP records,duplicates can arise. The result can be the exactsame invoice number being paid twice under thesame supplier number. One common scenario isduring e-invoicing enablement.Performing a duplicate check within the feedersystem is the first level of protection. The ERPcan provide valuable data for verification. Allinterfaced AP data, including data interfacedfrom the e-invoicing platform should be checkedagainst the ERP history. It’s important to havean appropriate criterion for duplicate flaggingto maximize recoveries while minimizing falsepositives. An exception queue is the best practiceto ensure the entire interface is not rejected.An invoice may be posted manually and thenuploaded to the e-invoicing platform with thesame invoice number and if the ERP is not doinga duplicate check on the e-invoicing feed into theERP, the duplicate will go undetected.#3 Fuzzy Payment ParametersProblem:Focus on:Consistent duplicate payment controls can preventmost duplicates. However, setting too broad ofcriteria can generate overwhelming levels of falsepositives, resulting in reviewer fatigue which leadsto errors. And setting criteria too narrowly canallow too many duplicates to slip through.Find the right balance. Determine the amount ofslippage you’re willing to accept. The tighter thecontrols, the more likely you’ll catch a duplicate,but you will also incur higher resource costs. Thisis where recovery firms become valuable. Controlsneed to be re-evaluated periodically and wheneverthere is change that could have an impact. 2020 PRGX USA, INC. All rights reserved.

#4 Rejected CreditsProblem:Focus on:Credits represent 60% or more of all recovereddollars in recovery audits. The top category, byvolume, in an AR statement review come fromreturned goods.Create a regularly scheduled report on thee-invoicing platform to identify rejected credits.Ensure there is a mechanism for suppliers on youre-invoicing platform to submit credits that do notpertain to specific orders that originated on theplatform. Make it simple and user friendly. If it’snot easy, suppliers may simply give up and notUsing an e-invoicing platform invites two uniquescenarios that can result in credits not beingprocessed by AP: In one scenario, problems arisewhen credits are rejected inside the e-invoicingplatform; in the other, credits cannot enter thee-invoicing platform at all. Rebates and creditsthat originated outside the platform are typicallythe cause here.record credits.#5 Infrequent AR ReviewsProblem:Focus on:An AR review can be labor intensive. As a result,most companies do not do their own statementreview – and so do not capture the duplicates andrecover overpayments.Prioritize what matters most. Rather thanattempting to review all, perform a targetedAR statement review on a quarterly or semiannual basis. Focus on select suppliers – thosewith the largest spend, credits count and creditspend. Consider the nature and importance ofthe supplier’s industry as well as the method ofinvoice delivery.Once you have selected the supplier group, honethe focus of the review itself. Limit your review tocredits on the AR (not invoices). Limit the numberyou choose to suit your resources and budget. Forthe times that you truly require a full AR statementreview, rely on a recovery audit firm to perform afull AR statement review efficiently for you. 2020 PRGX USA, INC. All rights reserved.

Learn MoreTo learn more about avoiding overpayment, watch our on-demand webinar:The Top 5 Ways to Prevent OverpaymentsInterested in learning more about our recovery audit services? Visithttps://www.prgx.com/contact/ to get started and to See What You’ve Been Missing .888-799-7976 [email protected] prgx.com600 Galleria Parkway, #100Atlanta, GA 30339 2020 PRGX USA, INC. All rights reserved.

Standardizing invoice numbering across all input platforms. Dis-allow entry of problematic characters such as prefixes or leading zeroes for manual and OCR entries. Evaluate every new point of entry to ensure conformance with these standards. Establish standards to address vouchers that don’t originate with a true supplier.