Accounts Payable Errors to Watch Out For

Have you ever paid a bill you shouldn’t have paid in the first place? It’s an awful feeling. Whether you’re a business owner who has fallen victim to an accounts payable (A/P) error that cost you some of your hard-earned cash, or a business owner who just wants to prevent bill-paying errors from ever happening, here are five common A/P errors to look out for:

1. Keep an eye out for fraudulent invoices

Some companies will send marketing documents disguised as invoices to businesses. In some cases, it’s simply outright fraud, trying to get you to pay something that is not owed. These invoices look official, but don’t be fooled.  Examination of the fine print can save you a lot of money and frustration.  Set up procedures to catch these types of invoices. Managers should be careful not to approve these invoices for payment, and bookkeepers should be trained to question their supervisors about these invoices.

2. Item(s) not received

Three-way matching can prevent paying an invoice for which the goods were never received. Put into place a couple of procedures to prevent this accounts-payable error:

• Have warehouse staff match the shipping receipt to what’s in the shipment when it arrives.

• Have accounts payable staff match the marked-up shipping receipt to the invoice when it comes in. If the invoice shows that more items were billed for than received, a call to the vendor to correct the invoice is in order. The invoice amount should be adjusted on the books and a check can be cut for the reduced amount.

3. Wrong amount

Sometimes the wrong price can be listed on the invoice.  If this happens, there may have been a misunderstanding during the sales process.  A quick call to the vendor is all that is needed so that a corrected invoice can be issued. 

4. Math error

This rarely happens in the age of computers, but it still can.  All invoices should be reviewed for reasonableness.  If it doesn’t make sense that something should cost so much, it probably shouldn’t.  In rare cases, a price may have been entered wrong or a computer bug could have occurred. 

5. Duplicate invoice

This happens way too often.  We may get an emailed invoice; then the same invoice comes in the mail.  We need procedures in place to keep it from being paid twice. 

Many accounting systems do this automatically, but if one character is off related to vendor name or invoice number, the system could break down.  Review a list of disbursements monthly to make sure payments don’t get duplicated. 

Procedures are the answer to reducing accounts payable errors and making sure you pay only the invoices that are truly due.  If you need help setting up A/P procedures, please don’t hesitate to reach out.