A duplicate payment occurs when an entity makes an extra payment in the same amount as the original. This is usually caused by an accounting error or processing glitch. Some duplicate payments may result in more than just a second identical payment. Duplicate payments are so common that some accounting firms specialize in this area and charge a percentage of the savings as compensation.
What Are Some Legitimate Strategies Recipients May Follow?
While this is an obvious overpayment, how the recipient treats that duplicate credit invoice payment might vary. These are some of the most common strategies recipients might encounter:
- Refund: In some cases, a triggered refund is how you know you made a duplicate payment.
- Credit: Some entities might refuse to return the money. Instead, they credit the overpayment to your account so that it reduces the expense of your future transactions by the exact amount.
- Debt repayment: If you owed the entity a debt, it may choose to retain the overpayment and credit it to the principal or interest of that existing debt. This does not usually affect future expected payments.
- Payment exemption: If you paid a recurring bill twice, the entity might allow you to skip your next payment. Should you decide to make the payment for the following month, then you would remain one month ahead on payments, which could benefit the business.
What Are the Risks Associated With Duplicate Payments?
Making the same payment twice or even more frequently can have devastating impacts on your business over time. The biggest risk is liquidity. The shorter your business is on cash, the more important it is to retain as much of it in-house as possible. If the entity never acknowledges the double payments, you might continue to drain cash resources by making them.
Duplicate payments are often a common way for untrustworthy employees to commit fraud. When perfectly timed, duplicate payments can remain undetected for some time, while shady characters fatten their pockets. It is better to catch this in-house and address it as soon as possible than to let external parties discover it.
Finally, double payments can completely throw off the accounting books. This could cause them to not balance at all. In desperate situations, an accountant could decide to make an adjustment to balance the books, instead of investigating the problem. This could allow the problem to continue undetected until the next audit.
What Are Some Tips for Preventing Duplicate Payments?
When it comes to duplicate payments, it’s better to prevent them from happening than resolve them after the fact. Use these tips to get started:
- Check for double invoicing: Sometimes you make a double payment because you received the same invoice twice. Put checks in place to detect duplicate invoice errors.
- Check for duplicated vendors: If your system has the same vendor added twice, you could make duplicate payments.
- Create a central system: Sometimes, it makes sense to send all invoices to one central office or one professional who can review and approve them all.
- Restrict payment sources: When making payments, rely on one source to determine the amount owed. Using multiple sources increases the likelihood of error, especially if they are at varying degrees of being up-to-date.
- Review rush checks: Ensure you have proper measures in place to process and document rush checks, so you don’t pay the same invoice twice.
- Automate payments: Automating your accounts receivable and payable departments can significantly reduce the risks of error, such as double-invoicing your own clients.
Automating payments can help you tick many of the other tips off the list with ease. Are you ready to reduce duplicate payments and reclaim control of your corporate finances?
Book a free demo with Gaviti to get started.