In the previous two instalments the case for performing duplicate payments analyses has been stated. Today we’ll shine the spotlight on a common risk factor leading to duplicated payments – duplicate vendor records.
Consider the following similar looking names:
There are lots of ways for computer programs to differentiate names which a basic search could miss but as people, we would recognise as the being same. Punctuation and spaces are common, but the words Limited and Ltd would work as well. It’s easy to imagine a multitude of possibilities in this regard. Try it, yourself. How many ways have you seen your company written down?
Controls that prevent identical invoices from being entered against a single account may not prevent entry against different vendors. If, as in the list above, these records we’re two sides of the same company then there’s a risk, however small, that duplicate payments may go undetected.
The risk increases if you have a large or outsourced back office function. This is because generally speaking, small teams are cohesive with having a good grasp of payments being made. Larger teams are less so; such that when identical invoices fall into the hands of accounts payable staff, they may be entered with impunity and without knowledge of their colleague’s actions.
Duplicate vendors occur for many reasons. One common trigger is data migration. If your accounts payable systems have been merged then it’s likely that duplicated accounts could have arisen. Checks prior to any data migration can help to identify potential duplicates, and merge data. But remember, analysis after the event can still be useful.
If there are no strict take on procedures, again, it’s easy to enter vendors two or more times. Multiple users with the ability to create new vendors increase this risk. Better then, to keep a small close-knit team who coordinate to review, set up, amend and delete accounts. Procedures and checks for new vendors limit the risk of duplication.
As described later, analytics can be used to detect duplicate vendors. Once identified they can be deleted or, if still in use, names amended to reflect a status ** do not use **.
Before processing duplicate payments we analyse our vendor master data; substituting the vendor master id with a duplicate vendor ID based on several possible fields: the bank account, the VAT number, the address, the phone number, the name. All of these fields are used to identify duplicate accounts. In fact, anything that could potentially link these accounts, however tentative should be used. The list generated at this juncture could be passed back to the vendor master team for review and remediation.
It doesn’t matter if we match unrelated vendors through a name or address as this is only an aid. The duplicate payments analysis treats invoice data belonging to vendors with the same duplicate ID as having originated from identical sources. This allows a net to be closed around duplicate invoices keyed against different vendor accounts, without generating too many false positives.
So what have we learned? Duplicate vendors are a risk to duplicate payments. They can occur for a multitude of reasons but can be mitigated. Several pieces of information are used to identify duplicate vendor accounts. Once identified, duplicate vendors are treated as a common source when comparing invoices.
In next month’s instalment we consider how duplicate invoices can be identified.