3 ways to cut down on inaccurate vendor payments

We’ve all been there: inaccurate vendor payments disrupting cash flow and costing your company a bundle.

And there are so many reasons why they happen. Maybe an A/P staffer got distracted and didn’t record a payment at the time it was made. Or perhaps you have two vendors with similar names, and the wrong one got paid. Pricing inaccuracies can also trigger inaccurate vendor payment.

Here are some proactive ways for heading off inaccurate vendor payments before they happen.

Clean up the master vendor file

Your master vendor file (MVF) is an essential part of your A/P process because you rely on it to be the accurate source for who should be paid and how. Any errors in the MVF can lead to a payment getting sent to the wrong company or person and other problems.

For instance, if there’s a duplicate vendor record, A/P can be in a situation with one record where the payment was recorded and another where it isn’t.

To make sure you have the most up-to-date vendor information, it’s vital to periodically audit the MVF for any duplicate records, vendors you no longer use or records with missing fields.

It’s also an opportunity to flag any suppliers with abnormal credit limits, payment terms or discount rates for review.

Auditing the MVF is a big project, so it may have to get put on pause or delegated if it’s your busy season.

Match the numbers to prevent inaccurate vendor payment

To prevent inaccurate vendor payments from going out, every predefined purchase should start with a purchase order (PO), and each invoice should be able to be traced back to a valid PO number.

You can even take it a step further by requiring a three-way matching process that aligns the amounts on a PO, an invoice and a sales receipt.

And if your company sends out a purchase order and receives an invoice upon delivery, make it a policy only to pay from the invoice. This can help you avoid paying for the same goods or services twice.

Eliminate manual data entry

Another major cause of incorrect vendor payments is using a manual system in which someone has to key in invoice and payment data. Common human errors that can occur include:

• Typing the invoice amount or date in the wrong field
• Transposing numbers, and
• Misplacing decimal points that cause you to pay hundreds of dollars more than you were supposed to.

A growing number of A/P automation solutions on the market can solve these problems, as well as take care of two-way and three-way invoice matching, and even automatically mark invoices paid as soon as you send the payment.