What are Duplicate Invoices, Why It Fails to Detect and How to Avoid It

Usually, companies rely on the manual oversight of their AP team or their sophisticated ERPs, like SAP, NetSuite, etc., to check duplicate invoices and prevent their payment. Catching such invoices and stopping their payment is essential for a company to prevent losing large amounts of money. Not detecting them results in multiple payments for the same line items contributing to spend leakages.

What are duplicate invoices?

Duplicate invoices or double invoicing occurs when a business receives the same invoice more than once with very slight differences in the invoice attributes. These could be invoice numbers, dates, amounts or even invoice descriptions. But duplicate invoices and consequent payments also occur when a single invoice received from a vendor is mistakenly entered twice in the system and paid twice for the same goods or services.

Studies show that companies make duplicate payments at the rate of 1- 2%. While this may not sound significant, but when your company’s non-payroll vendor spend totals $8-10 million, duplicate payments may account for $80-10K worth of cash simply being leaked from your system every single year.

Does your ERP detect duplicate invoices?

While detecting such invoices manually is an unrealistic ask, even ERPs may fall short. ERPs typically detect duplicate invoices based on checks on the invoice number, vendor name, date and amount. But, this is not enough to detect duplicate invoices, and many such duplicates simply slip through the cracks.

Why does ERP fail to detect duplicate invoices? 

ERPs alone are not efficient enough to reduce spend leakages from duplicate invoices. No matter how efficient an ERP is, it does not identify duplicate invoices when a vendor sends the same invoice with a different invoice number or when manual errors happen while punching the invoice number on the system.

Here is a consolidated list of reasons why ERPs fail to detect duplicate invoices:

• Invoice number

A mistake in the vendor’s account system could result in you getting an invoice with a different invoice number for the same amount on the same date. An invoice with the number ‘MBZ4582’ and another invoice with the number ‘MZB5482’ with the same line items and same amounts would be completely missed by the ERP. It may consider it as different invoices, and cannot be detected as duplicate invoices unless the line items are manually verified. 

Such errors in the invoice number could also happen when an accountant manually enters the invoice number into the accounting system. This is magnified multifold if the company receives invoices through multiple sources and platforms and hasn’t adopted any OCR technology for invoice automation. If an invoice hardcopy and an invoice copy sent by email are manually entered into the ERP but with an error in the invoice number, these duplicates are missed both by your AP teams as well as the ERP and will result in duplicate payments.

• Invoice line items

A vendor may send two invoices for the same transaction but with different line items. Though this is rare, it may occur due to a mistake from the vendor. A vendor may send a second invoice for the same transaction as a reminder within 30 days of the first invoice being sent to you but with a different line item description. In such cases, the ERP may fail to detect the duplicate invoice and identify it as a separate invoice.

For example: A vendor may send two invoices within 30 days for selling a printer. The first invoice may contain the description ‘LaserJet Pro MFP N300w’ while the second invoice may contain the description ‘Automatic laser technology printer’. In such a case, there is an occurrence of duplicate invoices which can be missed.

• Different vendor code

A single vendor may be mistakenly set up with two different vendor codes. This increases the risk of the same invoice being booked under both vendor codes, which could result in duplicate payments for the same invoice. 

For example: A vendor could exist in a company’s vendor master as MLab and MDB. An invoice from this vendor could be booked in both these vendor codes and eventually paid out too.

• Invoice line item descriptions

A vendor may send two invoices for the same transaction but with different line items. Though this is rare, it may occur due to a mistake from the vendor. A vendor may send a second invoice for the same transaction as a reminder within 30 days of the first invoice being sent to you but with a different line item description. In such cases, since ERPs and most automation tools don’t digitize line item descriptions, the duplicate invoice would fail to be detected.

For example: A vendor may send two invoices within 30 days for selling a printer. The first invoice may contain the description ‘LaserJet Pro MFP N300w’ while the second invoice may contain the description ‘Automatic laser technology printer’. In such a case, there is an occurrence of duplicate invoices which can be missed.

How does AI help to detect duplicate invoices?

Steps to avoid duplicate invoice payments

1. Centralize invoice receipt and management.

Businesses that tend to receive and process invoices from different sources or locations separately run a higher risk of making duplicate payments. Centralizing the receipt to a single entry point prevents incorrect or duplicate invoices from entering the processing queue from different departments. 

2. Keep vendor master records updated.

Duplicate invoices may also be paid if identical vendor entities are created in the accounting systems with slightly modified names for the same vendor. Ensuring vendor master data is regularly updated with new vendor records and old information is removed helps prevent such scenarios.

3. Reconciliation with purchase orders

Purchase orders act as proof of transactions and help businesses keep track of goods or services that have been ordered and delivered. Matching invoices with purchase orders serves as a check for invoices that need to be paid. 

4. Invoice approvals

Without purchase orders, a thorough review of invoices before payment also minimizes the probability of duplicate invoices being processed. Multiple layers of review and payment authorizations ensure any discrepancy is caught before payments are cleared.

5. Automate invoice management and payment

In the cases where accounts systems or human eyes fail to detect duplicate invoices, more advanced and AI-based accounts payable software will help identify such duplicate invoices and reduce spend leakages. 

How does AI help to detect duplicate invoices?

Such sophisticated AP automation vendors use AI to do advanced checks and penetrate deeper than ERPs to detect duplicate invoices. It checks the line items of the invoices when the same vendor issues two invoices on the same date (or within a gap of 30 days). If the line items are the same, it flags them as duplicate invoices. Checking line items also helps detect duplicate invoices when the invoice numbers are entered wrongly or the vendor sends two invoices for the same line item but with different ones. 

Besides specific checks for duplicate invoices, robust AP automation solutions can enable AP teams to detect any anomalies in spend and payments. AP teams can immediately identify if something isn't right by using trend analysis to see any spike in vendor spend or invoice count. 

Many errors or intentional vendor frauds happen for small value and one-time vendors who are challenging to recover from. Thus, double payments must be detected on time to reduce your spends. An AI account payable software should be equipped to give you sharp alerts to detect and eliminate vendor fraud or duplicate invoices immediately, helping you save at least 1% of your spend leakages.

FAQs

1. How do duplicate invoices occur?

Duplicate invoices and subsequent payments occur when a single vendor invoice is accounted for and paid multiple times by a business. Manual invoice data entry, invoice submission errors, fraud, or broken workflows are common reasons for duplicate payments.

2. Are duplicate invoices a common issue?

Duplicate invoice payments are a fairly common issue, with studies showing that most businesses make the same payments to 1-2% of their spend. While seemingly small, these payments severely impact a company's bottom line. 

3. What problems can duplicate invoices cause?

Duplicate invoices, if undetected, result in financial losses for a business and negatively impact the company's profitability and cash flows. Besides this, they also put a strain on a business' relationship with its vendors.  

4. What should I do if I receive a duplicate invoice from a supplier?

Once a duplicate invoice is received, the accounts payable team should inform the vendor about such duplicates and confirm the error. If any duplicate payment has been made, the payout may be rectified by issuing a credit note.

5. Can duplicate invoices lead to legal issues?

Cases of duplicate invoices sent by a vendor with malicious intent of overcharging the customer or receiving a payment for goods or services that were never delivered amount to invoice fraud. The vendor who commits fraud is liable for their actions and may face legal repercussions if proven guilty. 

6. Can software solutions help prevent duplicate invoices? 

Software solutions like ClearTech that help automate invoice management and accounts payable processes utilize artificial intelligence to perform advanced checks to identify duplicate invoices and prevent erroneous payouts.