How to Fix and Prevent Duplicate Payments

Accidentally cutting two identical checks for the same invoice may not spell disaster for an accounting department, but repeated duplicate payments can add up if financial teams aren’t careful. Whether triggered by data entry errors, vendors resubmitting invoices after payment delays, or even fraudulent schemes by bad actors, duplicate payments frequently occur when accounts payable departments lack strong recordkeeping and proper oversight. Here’s how organizations can identify and fix existing duplicate payments and bolster their accounts payable processes to prevent them in the future.

What Are Duplicate Payments?

Duplicate payments occur when an organization mistakenly pays for the same product or service more than once. A number of scenarios can cause this. For example, a second payment might erroneously be made in response to a vendor’s reminder invoice, even though the initial check was already in the mail. Or a single invoice might be paid twice because a duplicate entry was accidentally logged in on the accounting workflows. Suffice it to say, these scenarios are surprisingly common in the accounts payable (AP) world According to the American Productivity and Quality Center, between 1% and 2.5% of total disbursements processed by companies each year are duplicated or erroneous.

Duplicate payments can also result from fraudulent activity, whether external or internal. External fraudsters may submit altered invoices with minor changes to dates, invoice numbers, and other details to trigger a second payment for the same service. Internally, an employee with access to AP systems might intentionally create duplicate or fake invoices to trigger a double payment. In some cases, internal employees collude with an external party to carry out these schemes.

Key Takeaways

• Duplicate payments are a common accounts payable error that leads to overpayments to legitimate vendors and, at times, to scammers.
• One of the most common root causes of duplicate payments is error-prone manual data entry, which can result in multiple entries of the same invoice in a system.
• Decentralized invoice processing can also result in duplicate payments when identical or nearly identical invoices are submitted and approved simultaneously.
• Standardized and automated accounts payable processes can greatly reduce the risk of duplicate payments.

How Do Duplicate Payments Occur?

While many situations could spur an organization to issue a duplicate payment, the root causes typically boil down to poor recordkeeping and inadequate oversight. Below are some of the most common elements contributing to these accounting errors.

• Lack of visibility:

  A lack of visibility in AP processes makes it easy to lose track of invoices and payments. Visibility issues often stem from fragmented or siloed systems, manual methods of data entry, and ad hoc communication among stakeholders involved in purchasing and payment. Without a comprehensive view of invoices received, approved, and submitted for payment, organizations will struggle to fully understand what’s been paid and what’s outstanding. This greatly increases the risk of duplicate payments—especially when the same invoice is sent to multiple departments that don’t share a platform or have a reliable communication channel.

• Poor invoice management:

  Inadequate controls and standards pertaining to invoice management significantly increase an organization’s risk of issuing duplicate payments. This risk is especially pronounced in organizations that rely on decentralized systems for invoice processing. When different departments or locations handle invoices independently, it’s possible for multiple departments to process the same invoice at the same time. A decentralized approach also breeds inconsistencies in invoice numbering or how invoice details are recorded, making it difficult not only to identify duplicates but to track payments and reconciliation across departmental silos.

• Duplications in the master vendor file:

  Poorly managed master vendor files that include duplicate records can contribute to duplicate payment woes. When organizations fail to maintain clean master vendor files with consistent naming conventions and data validation rules, multiple records for a single vendor may linger. These duplications often result from small variations in vendor information, such as differences in names or contact details. For example, a vendor may have two records after a headquarters relocation if a new entry was created with the updated address and the old one was left in the system. Multiple entries in the vendor database make it tough to comprehensively track payments and can increase the likelihood of erroneous or fraudulent payments.

• Too many manual processes:

  Organizations that rely heavily on manual processes for invoice handling and payment issuance put themselves at significantly higher risk of duplicating payments. Manual data entry could lead to “fat-finger” errors, such as typos in invoice amounts or numbers, that may inadvertently trigger undetected payment duplicates. Once such mistakes are made, ensuing manual approvals, validation, and auditing processes will drastically reduce an organization’s chances of catching duplications before the money is disbursed. Implementing robust accounting automation technology can eliminate many points of exposure to human error in data entry. At the same time, automation enhances the speed, accuracy, and coverage of cross-checks for irregularities that contribute to duplicate payments.

• No workflow standardization:

  Standardized and validated workflows that govern how invoice data is entered into accounting systems; how three-way matching of invoices, purchase orders, and receipts is conducted; and how approvals are granted—done well, these provide critical guardrails for preventing duplicate and erroneous payments. Organizations that lack these workflows often struggle to maintain consistency in data entry, increasing the chances that invoices will be entered multiple times in slightly different formats. Detection and elimination of duplicates becomes even harder. Additionally, inconsistent methods for invoice matching and approvals can lead to laxity in controls that determine when and how funds are released.

• Scams and fraudulent payments:

  The vast majority of duplicate payments are unintentional, caused by erroneous data entry and undisciplined recordkeeping. But they can also come at the hands of deliberate scams or accounts payable fraud. For example, cybercriminals impersonating legitimate vendors via email might send duplicate invoices with altered payment details, hoping to redirect funds to a new account while the original payment is still in process. Alternatively, a dishonest vendor—or bad actor at a vendor—might resend an identical invoice in hopes of reaping a double payment. In some cases, an unscrupulous employee may collude with a vendor to approve and issue a duplicate payment with the promise of splitting the proceeds.

How to Fix Duplicate Payments

While prevention is one of the best ways to minimize the financial and business risks of duplicate payments, even the most disciplined AP departments can make mistakes. Meanwhile, fraudsters will always be waiting to exploit weaknesses and commit fraudulent accounts payable acts that can lead to duplicate payments. Therefore, organizations must have a reliable process for identifying payment redundancies—and ways to recover those funds as quickly and thoroughly as possible.

The following four steps are integral not only to fixing duplicate payments that have already been processed, but also for strengthening existing controls to prevent similar errors from recurring in the future.

1. Identify the Duplicate Payment

Before a duplicate payment can be rectified, it first must be identified. Organizations need systems in place to accurately detect redundancies in payment records, ideally through automated checkups that can analyze payment history for patterns or anomalies indicating double payment. Obvious signs might include two payments with identical invoice numbers or matching amounts made to the same vendor within a short time frame. The accounting team should be engaged in—and ideally lead—this ongoing process of hunting for duplicates, as early detection increases the chances of successful recovery. Many organizations also supplement their efforts with periodic duplicate payment audits led by third-party firms. These audits both recover funds and help remediate controls and operational procedures in order to reduce the risk of future occurrences.

2. Notify the Vendor

Once a duplicate payment has been discovered, the vendor should be promptly notified with a clear and courteous explanation of the overpayment and a request to help resolve the matter. The written notification should include relevant details, such as payment dates, amounts, and invoice numbers. It should also include instructions for resolution, such as issuing a refund or applying a credit to future invoices, along with a deadline for their response and action. Depending on the business relationship, following up with a personal phone call may help expedite resolution and provide an opportunity to apologize if the error originated on the organization’s end.

3. Document the Duplicate in Your Records

As duplicate payments are identified and resolutions are underway, organizations should document them in their accounting systems and other auditing and governance records. This documentation should include details about:

• The original payment
• The duplicate payment
• Recovered funds
• How the duplicate was discovered
• The steps taken to fix it
• Follow-up actions to address the root cause

To ensure thoroughness and consistency, organizations should establish standardized formats and procedures for recording duplicate payments. In accounting software, this might involve creating a specific field or flag to mark duplicates.

Additionally, organizations should keep a detailed log of all communications with the vendor related to the duplicate payment, including dates of correspondence, summaries of phone conversations, and copies of written exchanges.

4. Implement Corrective Actions

Once identified and remediated, duplicate payments should spur corrective actions that bolster accounting procedures and prevent future mistakes. Operations should conduct duplicate payment audits and operational process reviews to analyze accounts payable processes and uncover weaknesses that led to the error. Weaknesses might include insufficient invoice matching procedures, inadequate approval controls, inconsistent data entry standards, or poor vendor master file management. Insights from these analyses can guide improvements in AP automation, data entry practices, approval workflows, and staff training.

How to Prevent Duplicate Payments

When it comes to duplicate payments, an ounce of prevention is worth a pound of cure. Some duplicate payments simply may be unrecoverable, such that even when a vendor issues a refund or credit, the business still loses money. These losses may include the administrative overhead required to identify, remediate, and document the error, as well as the potential loss of goodwill from valued vendors. Investing in measures to lessen the likelihood of ever issuing a duplicate in the first place can yield significant savings over time. This can be accomplished through adhering to the following best practices.

Standardize Your Workflow

Standardized workflows should govern every aspect of the process, including how invoices are received, data is entered, payment approvals are managed, invoices are matched, and payment methods are selected and used to disburse funds. Clear and repeatable processes eliminate ad hoc actions that result in errors and foster the consistency needed to automate invoice handling and payment processes. Standardized workflows also simplify employee training, helping staff make fewer errors and more effectively double-check records for mistakes.

Review Your Master Vendor File Regularly

Organizations should regularly audit and cleanse their master vendor files to remove duplicate and dormant accounts. Vendor information should be standardized according to clear guidelines, such as a consistent naming convention for entries. For especially cluttered master vendor files, merge features and independent tools can help automate and expedite the process.

To maintain a clean file, organizations may consider instituting data validation rules to prevent duplicate entries during vendor setup. They should optimally work toward adhering to a strict policy of assigning one Tax ID per vendor within the master vendor file. Access for master vendor records maintenance should be limited to a small, authorized group of people.

Avoid Multiple Source Documents

Duplicate payments commonly stem from a single invoice that’s sent to multiple people or departments—via email, mail, fax, etc.—with each processing it separately. Organizations can constrain the problem of multiple source documents by centralizing invoice receipt to a single point of entry and implementing a digital document management system for invoices and purchase orders. Consolidating source documents into a single source of truth, combined with standardized numbering systems, can help track, match, and verify transactions. This approach can cut down on duplicate payments and improve the efficiency of the AP function.

Pay Invoices Quickly

Most obviously, vendors are less likely to resubmit invoices if they’re paid promptly, reducing chances that the same invoice will be processed twice. Timely payments also create a clearer audit trail, making it easier to match recent transactions with corresponding invoices and purchase orders. More important, a habit of making quick payments can improve relationships with vendors and could even help them quickly spot duplicates on their end if one does occur.

Enhance Fraud Detection

Integrating fraud detection functionality into AP technology can, on its own, reduce the risk of duplicate payments. Layering these tools with standalone fraud detection systems that look for patterns and anomalies in financial documents can further reduce that risk. AI-powered fraud detection tools, for instance, can look for signs of fraud, including manipulated dates, altered invoice numbers, and suspicious patterns in payment amounts and frequencies. Detection mechanisms that use image hashing, a technology that generates a unique “digital fingerprint” of an image used to identify changes or duplications, can also look for document forgery attempts. Organizations can also invest in bolstered invoice matching to cross-check invoices with purchase orders and receipts. Simply automating the matching process enables organizations to more consistently spot discrepancies between invoices and what was ordered. In addition, some automated invoice matching technology will check for unusual patterns in pricing or quantities that could be signs of ongoing fraud.

Switch to Electronic Payments

The age-old problem of accidentally cutting a second check for a resubmitted invoice—while the original check is still in the mail—disappears when a company switches to electronic payments. Electronic payment methods, such as ACH transfers, speed up processing times and provide real-time visibility into payment status. Electronic payment systems also facilitate automated reconciliation with bank statements and typically include built-in algorithms to detect suspicious or anomalous transactions before they’re processed.

Simplify Your Invoice Process

Easy ways to streamline accounting processes and invoice handling include standardizing invoice numbering conventions across vendors, centralizing invoice receipt to a dedicated email address or digital portal, and creating an easy-to-follow set of approval workflows that defines how payments are reviewed and authorized. These steps not only reduce error-prone workflow exceptions but also create clearer records that make it easier to track invoices and spot potential duplicates before payment is issued.

Automate Your Invoice Payments

Implementing accounts payable automation across the entire invoice life cycle minimizes human error in data entry and increases the effectiveness of cross-checking during invoice matching and approval processing. For example, optical character recognition (OCR) and automated data capture of scanned documents make it possible to automatically transfer invoice details directly into accounting software, without any manual data entry. The consistency of automatic data entry reduces the possibility of discrepancies in invoice information that might make it hard to detect a double entry. Automated three-way invoice matching with purchase orders and receipts improves both the speed and accuracy of these checks, ensuring that every invoice undergoes appropriate oversight. Additionally, automated error and fraud detection algorithms that look for signs of duplicates can greatly increase the chances of catching them before payment is issued.

Establish an Audit Process

A robust audit process that periodically reviews AP transactions and underlying processes can facilitate swift identification of any duplicate payments already in process. It can also pick up on patterns or weaknesses in the department that could cause future issues. A comprehensive audit approach cross-checks payment records against vendor statements and analyzes historical data to pick up on trends or anomalies that could indicate fraud or recurring errors. Solid audit processes should also verify the accuracy and cleanliness of vendor master files, and evaluate the integrity of approval workflows.

Cloud Accounting Software Produces Accurate AP Reports

Centralizing invoice handling and consolidating source documents onto a single platform can go a long way toward preventing duplicate payments in accounts payable operations. NetSuite Cloud Accounting Software provides organizations of all sizes with a unified platform to automate and minimize errors in AP invoice processing, while also enhancing general ledger, accounts receivable, and tax management functions. The platform offers AI-driven automation to efficiently process and record invoice and payment information. More important, it serves as a single source of truth for AP information, increasing visibility and making it easier to spot duplicate and erroneous payments.

One of the more common forms of erroneous payments, duplicate payments stand as a universal concern for accounts payable teams. Organizations can reduce the risk of losses from duplicate payments by instituting more standardized workflows in their AP process, as well as implementing automated data entry and approvals safeguards into their invoice handling procedures.

Duplicate Payments FAQs

What system can prevent duplicate payments?

An automated accounts payable system can help prevent duplicate payments by reducing data entry errors, improving invoice matching, and strengthening other oversights used to detect signs of multiple payments for the same invoice.

What is the risk of duplicate payments?

Businesses risk financial losses, increased administrative overhead, and a loss of trust from their vendors when they issue duplicate payments. Duplicate payments also indicate to auditors and investors potential integrity problems in the business’s financial systems and processes.

How does a company find out if it has made a duplicate payment?

Companies can discover duplicate payments using detection technology and audits. These audits check transaction history and records for signs, such as multiple payments against one invoice number or identical payments in quick succession to a single vendor.

What happens if an invoice is paid twice?

If an invoice is paid twice, organizations should collect evidence of the duplicate payment and notify the vendor as quickly as possible. They should also request a refund or credit toward future invoices.