Are Accounts Payable overpayments reducing your company’s profit?

Each year the average Fortune 500 company issues an estimated 300,000 checks from its Accounts Payable department, with overpayments in excess of $5 million per company. Even if your business is not in the Fortune 500 ranking, overpayments can occur even though strict controls exist. It is estimated that the average company overpays by 0.1% to 0.2% of revenue.

Possible Causes of Overpayments:

  1. Duplication
  • Payments are made from both original invoices and faxed invoices.
  • Acknowledgements are accidentally paid.
  • Missing receiving documents are recreated and signed resulting in duplicate receipts.
  • Invoices for operating expenses are approved and paid twice.
  • Charges to credit cards are mistakenly paid via check.
  1. Clerical Error
  • Inexperienced and temporary Accounts Payable Representatives pay invoices without proper documentation.
  • Clerical input errors occur.
  • Vendor credits are not deducted.
  • Freight bills are not properly cross-referenced to shipments or receipts.
  • Cash discount terms are not taken.
  • Trade discounts are missed.
  • Disorganization may result in errors.
  • Sales tax is mistakenly paid.
  • Payments are made to the wrong vendor.
  1. Vendor Error
  • Returned products are not credited.
  • Prices charged are higher than agreed upon.
  • Quantities invoiced are greater than quantities received.
  • Freight is incorrectly invoiced.
  • Vendor invoices contain errors.
  • Freight carriers issue incorrect discounts.
  1. Other
  • System limitations allow errors to be processed.
  • Inadequate communications between departments result in overpayments.
  • Insufficient procedures and internal controls may result in errors.
  • Downsizing, system implementation, merger, acquisitions and rapid growth strain Accounts Payable and internal controls are bypassed.

You might think your company does not need an Accounts Payable review. Even with a proficient staff and an advanced computer system, consider the following:

  • Human errors occur even with the most advanced system.
  • There are over forty steps where errors might arise.
  • Internal and external auditors review only a small percentage of invoices, possibly missing overpayments.
  • Your company could be losing $1,000 for every $1 million of revenue, if one error is made for every thousand vouchers.

A/P Review, Inc. will recover overpayments and improve your company’s bottom line.

  • There are no up-front cost. Our fee is based on a percentage of monies recovered. Your company can only save money.
  • A/P Review, Inc. can be used to double-check accuracy levels.
  • Only minimal Accounts Payable involvement is required.
 
 

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