Duplicate Payments Series – Part 2: An Overview of Duplicate Payments

2011-09-01

A low turnover of spend, unconvinced by the arguments, or worried perhaps that it might make you look bad. There are plenty of reasons why organisations put off performing a payments review. I would argue, rightly, that there is no time like the present to look at your Accounts Payable function. What’s the worst that can happen? You invest some time and either recover some money, or get a clean bill of health.

No system is ever 100% perfect

No system is ever 100% perfect and whilst this is true of accounts payable, as we will see it is equally true of duplicate analytics. Many people find this hard to comprehend at first, we will try to explain.

It’s a very fine line between identifying a duplicate payment and being overrun by matches which aren’t. Being swamped by false positives isn’t the objective of the exercise, but inevitably there will always be a few. How much time and effort you afford to the exercise will determine the ratio of each. Everyone is familiar with the analogy of needles in haystacks – but try looking for needles when they are disguised as pieces of hay? Now you’re beginning to see the problem.

Many companies set a threshold

We want to minimise the volumes needed to be checked but don’t want to miss those elusive needles. And even having found one, will it be worth your effort? After sifting through the paperwork, badgering the vendor week after week chasing payment you might decide otherwise. It can be a lot of work. Many companies set a threshold below which they don’t investigate. This is normally around £1,000 but will vary based on the type of business, the number of duplicates occurring, but not overlooking the tenacity and belligerence of the person in charge. Sometimes it is advantageous to set the analytical threshold below the level you will chase – just in case there are a few which come close. Of course, it’s a personal choice.

But what if I don’t find any? Then truly count your blessings. Finding no duplicates at all means that the controls in place are effective, either that, or you need to delve deeper into the data to find the duplicates!

Me, you or someone else?

Once you’ve decided that you’d like to perform a duplicate payments review, you need to work out who’s going to do it. Businesses for the most part don’t like paying external parties to look for duplicate payments – it makes them uneasy. What if those companies don’t find any, how will we know that they’ve done any work at all? Panic not! Many duplicate finders work on a no win, no fee basis. But keep in mind, there’s a good reason for it. Remember they’re making a living at it!

‘No win, no fee’ I can live with that I hear you say. But as with anything, there is always a draw back. The consultancy will always target the largest and easiest wins. They’re not going to wade through the thousands upon thousands of false positives in the vein hope of finding one, which means some needles may fall through undetected. Additionally, they’re not likely to want to share with you how they identified them, which means you don’t learn about the controls which broke down. Without that you’re likely to repeat the mistakes that lead to the duplicate payment and the consultancy will turn up next year confident of cleaning up again.

I’m glad to say that DataConsulting isn’t one of those consultancies. Duplicate Payment finding isn’t the only service we provide. We use it as a means of building bridges with our clients, to showcase our capabilities.

But for those who prefer to set up their own analytics, we’ve set out our thoughts on duplicate payments for your careful consideration. In the next few instalments we aim to explain the method in enough detail that you could develop the analytic yourselves. We’ll leave it to you to decide whether you try to put it into practice.

Thursday, September 1, 2011 In: Hot Topics Comments (None)

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