It makes sense that most accounting departments put more focus on collecting accounts receivable because that is where cash flows in. On the other side of the balance sheet is accounts payable or where the cash flows out. So in terms of management priority accounts payable is pretty far down the list but duplicate payments and contract non-compliance can erode the bottom line quickly.

Post Audit of Accounts Payable
Companies need to keep an eye on the accounts payable department but how do you discover duplicate payments? Many companies are using third party firms or software to provide post audit recovery services. The difference between the two is cost and scope.

A post-audit service by a third party firm examines accounts payable transactions after the check has been processed. The auditor reviews transactions after software exposes errors through the data mining function. These errors are examined and validated with related documents. When a claim is presented to the client, the auditor has the responsibility to follow-up and answers any of the vendor’s questions. The auditor collects his contingency fee after the claim is settled.

Post audit software can range in price depending on scope and industry. Most software uses benchmarks, controls and analytics to discover discrepancies. Many industries have specialized needs such as the retail and beverage distribution industry where duplicate payments are more prevalent.

Streamline Accounts Payable
Third party services and audit software can be costly and is often beyond the reach of most small business. For a less expenses but viable solution a small business can streamline the accounts payable process to reduce the possibility of duplicate payments, fraudulent bills and employee embezzlement.

To avoid fraud, you can institute a variety of checks and balances. One simple method is to separate duties. One employee can process and print a check, but another employee should be required to review and sign it. This dual duty can be incorporated into most basic business accounting software, so employees can only access and perform assigned functions. For checks that exceed a predetermined amount, requiring a second signature is another best practice. Separating the process of adding a new supplier to your system from the ability to issue payment is also advised.

No matter what size your business, a post audit or streamlining of the accounts payable system should be on the to do list. The audit is a quick way to see if there are inefficiencies or lack of internal controls in the AP department and streamlining ensures even the smallest business can control errors.