It’s a situation most of us have encountered at one point or another in our careers. Two departments work together towards the same goals, but they don’t have much communication or visibility into what the other is doing, and it creates unneeded difficulties for everyone. Marketing and sales. IT and operations. Purchasing and accounts payable. In a perfect world, these departments work and communicate seamlessly with each other. In a less than perfect world it can be like oil and water.
If you’re lucky, you’re at an organization where those silos have been closed. If you’re not so lucky, it may be a source of frustration for you and your colleagues — but also an opportunity for improvement in the way your organization handles its business internally. Difficulties of this kind are very common, and navigating them successfully is a valuable soft skill.
Breaking down these silos can do more than improve organizational efficiency. In some cases, it can save money and cut down on wasteful spending.
Better visibility between Purchasing and Accounts Payable
In the world of finance and procurement, there is a specific silo we’ve seen crop up time and time again between purchasing and accounts payable, and it’s what we will focus on for this article. Allow us to paint a picture:
Purchasing reviews and audits purchasing card transactions. Accounts payable reviews and audits invoices. Neither one really has visibility into the other’s “space”. And so, an innocuous transaction appears as a card transaction AND is processed as an invoice. Perhaps AP was unaware of a P-Card payment and processed an invoice that was already paid. Or perhaps a vendor charged you twice through human error or… some less innocent reason.
Sound familiar? Is it possible that this is happening at your organization?
If it does, you’re not alone. Duplicate payments make up an average of 1.5% of an organization’s annual spend according to the American Productivity and Quality Center. If the organization in question has, for example, $75 million in annual revenue, that’s over $1 million lost because of poor communication and visibility.
As you can see, closing those silos and tightening those internal controls is essential to cutting out what could be a serious source of wasteful spending. Here’s how you can pave the way to better visibility at your organization.
Identify where organizational blind spots are
First, take an honest look at where you could be vulnerable to duplicate payments. For example:
- Can the AP department see what is being purchased on P-Cards? Are they making assumptions as to whether or not an invoice has been paid?
- Are different departments involved in the same transactions? Are there any disconnects in their process?
- Are the pathways for payment too complicated to follow effectively?
- How are vendors appearing in your system? Are merchant codes duplicated? Are vendors appearing more than once with slightly different names or contact information?
- If duplications are intentional, do you have the controls in place to catch it? For example: an employee pays for some legitimate expense on his P-Card, then submits the same expense as an out-of-pocket reimbursement. The approver doesn’t see what he puts on his P-Card so he gets paid again. Or a vendor has your organization’s purchasing card on file and charges it, but then invoices your organization too. They get paid twice. As you can see, there are lots of ways this can happen.
Put a plan in place to end it
Better visibility is the key. Here are two specific ways you can put a plan in place to end duplicate payments:
- Connect Accounts Payable to all means of payment, including purchasing/P-Cards. As discussed, duplicate payments often happen because AP doesn’t have visibility into card transactions.
- Review and compare invoices against other means of payment. Easier said than done, right? But this is the surefire way to cut out those duplicates for good. Credit card, invoice, and out-of-pocket reimbursements should be compared against each other.
Card Integrity can help with our Invoice Review service
Card Integrity is a purchasing card auditing firm that can find duplicates not just across credit card transactions, but across invoices and out-of-pocket reimbursements with our Invoice Review service. As a third-party outsourced service, Card Integrity reviews card transactions, invoices, and reimbursements against each other to give your organization better visibility into payment activity.
We can also help you clean up your vendor records. Slightly off or inconsistent contact information increases the risk of duplicate payments. We can ensure vendors are accurately documented and properly categorized.
Interested in learning more about the Invoice Review service? Check out our free Invoice Review White Paper below! It gets more in-depth on duplicate payments and how our Invoice Review process works. It includes additional breakdowns, practical applications, and customer testimonials on the service.
