An accounts payable audit is a process that intends to uncover any errors that occur within your accounts payable department. These can occur for a variety of reasons, but the nature of them is that they usually go unnoticed. The larger your company and the higher the number of supplier invoices you pay, the worse the problem is likely to be. Duplicate payments – just one kind of common overpayment – can typically cost your business 0.1 percent of turnover, for example. That can represent a substantial proportion of your profit margin. Recovery audit software will help to identify where you are making unnecessary payments, and will help you to claim back the money wasted – effectively given away – through error or, occasionally, fraud.
Generally speaking, it doesn’t matter how good your accounts systems are. They are good at doing what they are made to do: paying suppliers. They may have basic controls in place to flag problems, but usually they are not so good at uncovering human error, or malicious false claims. This is where specialist software can make a real difference. It goes through your accounts department and invoices, identifying discrepancies and suspect invoices. These could have been caused by some kind of accident. Alternatively, they may arise when a supplier intentionally tries to defraud your company by sending invoices for work or goods that have never been provided. These can slip through the net, especially when they resemble other invoices and seem genuine, or are one of hundreds of invoices.
The scale of duplicate payments and other errors can be significant. One study suggests that between 0.1 and 0.5 percent of invoice payments are duplicates. Because there are more than 30 reasons why such duplicates occur, recovery audit software is needed to check all the different variations, and other issues. The typical invoice involves perhaps a dozen different data fields, giving huge opportunity for error. The extent of the problem is such that an accounts payable audit can pay for itself the first time you use it. If you are examining several years of historical accounts records, savings can easily amount to five or six figures. Acting fast is necessary, since money can be reclaimed – so long as the originator of the invoice is still in business. If they are not, the chance is lost. That could mean thousands of pounds you’ll never get back.
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