No organization is completely free from human errors, system gaps, or inconsistencies in data records. The problem is that these issues inevitably lead to duplicate payments and other overpayments—costing your company money immediately. Moreover, in our experience, only some of these errors are detected and corrected afterward.
In this article, we introduce five of the most common causes of such errors. By the way, if you’d like to learn how to prevent overpayments, you might find our article "Five ways to prevent duplicate payments" interesting. With experience from over 900 projects, we have categorized the most important causes and risks of duplicate and overpayments into five major groups:
1. System Risks
System risks include all risks related to the systems used for recording purchase orders and incoming invoices (e.g., OCR software and various tools for mapping the P2P process such as Smart Invoice, Tangro, etc.), as well as processing and posting these transactions (SAP, Microsoft Dynamics, Navision, etc.) and executing payments (banking tools, interfaces from SAP, etc.):
■ Faulty OCR recognition: Automated text recognition can result in reading errors, especially with poorly legible documents (e.g., confusing "O" with "0") or invoices with non-standard layouts (e.g., an order number being recorded as an invoice number). If subsequent checks are insufficient, such errors often go unnoticed, leading to incorrect payments, such as booking to the wrong creditor or duplicate payments (one invoice recorded twice due to a reading error and a correct entry).
■ Duplicate vendor entries in master data: This major source of errors exists in virtually every large organization. The same supplier may be created multiple times in the system with slight variations in spelling. This not only reduces transparency in evaluations such as ABC analyses but is also a frequent cause of duplicate payments (one invoice paid under one vendor entry and again under its duplicate, bypassing duplicate payment controls). Additionally, this issue is sometimes exploited to conceal fraud within the company (e.g., fake invoices sent to an inactive duplicate vendor with a changed bank account).
■ Consolidated vendors: Many companies use collective or CpD (Central Pay Desk) vendors to reduce administrative workload. However, these require fewer control steps between invoice posting and payment, increasing the risk of duplicate payments if invoices are recorded under both a collective vendor and an individually created vendor.
■ Fragmented systems and system gaps: Isolated data processing across different business units makes data exchange and process consistency difficult. System interfaces always introduce complexity and increase the likelihood of errors. Additionally, error analyses are typically limited to individual systems, rather than spanning multiple platforms (e.g., multiple parallel SAP systems, different company codes within the same system, or separate systems for invoice capture and ERP). Errors that would be caught in a unified system often go undetected.
■ System transitions and migrations: Switching from one system to another, such as migrating to S/4HANA, nearly always results in inefficiencies, including duplicate data records, operational errors in the early stages, overlap errors (due to data being recorded in both the old and new system), an increased error rate from supplier-side adaptation challenges, and heightened human errors due to additional workload during the transition period.
2. Supplier Risks
Issues on the supplier side are another frequent cause of overpayments:
■ Multiple submissions of invoices and copies, reminders, and discount claims: Suppliers may send duplicate documents for the same service, or issue unjustified discount claims, increasing the risk of overpayments due to multiple entries with varying invoice attributes (circumventing duplicate payment controls).
■ Unclear or misleading invoice layouts: Poorly structured invoices can lead to misinterpretation, especially regarding key invoice attributes such as invoice numbers, service descriptions, periods, and tax components (e.g., import VAT).
■ Missing VAT declaration by suppliers: The absence of required VAT details can result in financial disadvantages and legal complications.
■ Missing or refused supplier credit notes: Suppliers failing to issue credit notes for agreed-upon refunds or corrections can lead to overpayments and lost revenue.
■ Incorrect or incomplete supplier invoice data: Faulty invoices often require manual corrections, and errors may be overlooked, leading to financial discrepancies.
■ Supplier invoice fraud: Illegitimate or fake invoices can result in unnoticed fund outflows and financial losses.
■ Inconsistent numbering of invoices and credit notes: Non-standardized or confusing numbering schemes (e.g., occasional prefixes added to invoice numbers) can increase the likelihood of multiple entries, leading to duplicate payments.
3. Human Errors
Human errors—on both the recipient and supplier
sides—play a significant role in overpayments.
This type of error can never be entirely eliminated:
■ Manual entry errors: Mistakes in data entry, such as transposed digits, incorrect amounts, missing characters, or misplaced decimal points, are common.
■ Multiple approvals by different departments: Duplicate approvals of the same invoice or purchase order can lead to overpayments.
■ Temporary staff and new employees: Temporary workers, contractors, and insufficiently trained staff typically have higher error rates than experienced personnel.
■ Lack of oversight for automated and dark postings: While automated processes reduce workload, inadequate monitoring increases the risk of errors and overpayments.
■ Duplicate vendor account creation: If a proper search is not conducted before creating a vendor account, duplicate entries may occur, leading to confusion and errors.
■ Booking of reminders and invoice copies: Accidental processing of duplicate documents or a lack of control over alternative invoice submissions can result in tax-related issues and increased duplicate payments.
■ Overreliance on automated system controls: Blind trust in software-based validation without sufficient manual review can overlook system gaps, special cases, or bypassing of standard processes. Paradoxically, this can lead to an increase in errors following system upgrades, despite additional automated controls being introduced.
■ Poor communication: Inadequate information flow between departments (e.g., procurement, accounts payable, and invoice approval teams) often leads to errors, duplicate payments, and overpayments.
4. Process Risks
Internal business processes and organizational changes can also contribute to overpayments:
■ Internal restructuring: Mergers, acquisitions, outsourcing, and business relocations often lead to transition issues, increasing complexity and errors due to untrained personnel.
■ Employee turnover: High staff turnover in key financial roles results in knowledge loss, temporary staffing gaps, and increased errors from insufficiently trained employees.
■ Siloed functions and departments: When departments operate in isolation and fail to communicate effectively, the risk of errors and overpayments increases.
■ Increased error rates during transition phases: Process changes (e.g., shifting to a new Shared Service Center) often cause a temporary spike in errors, resulting in more duplicate and incorrect payments.
■ Business continuity challenges in crisis situations: Events like pandemics and related operational shifts can severely impact process accuracy. For example, during the first two years of the COVID-19 pandemic (2020–2021), detected overpayments in Germany increased by 63% compared to 2019
5. Growth Risks
Rapid business growth introduces new challenges, as existing processes often struggle to keep pace:
■ Increased supply chain complexity: More suppliers, international expansion, and unfamiliar regulations increase the likelihood of invoice errors, including duplicate payments.
■ Integration of new business units: Mergers and acquisitions can lead to inconsistencies, as legacy systems and processes may run in parallel, causing additional complications.
■ Higher invoice volumes: Increased transaction numbers often lead to disproportionate increases in error rates. Under pressure, teams may adopt time-saving measures that improve efficiency but also introduce more mistakes.
■ Higher invoice volumes: Increased transaction numbers often lead to disproportionate increases in error rates. Under pressure, teams may adopt time-saving measures that improve efficiency but also introduce more mistakes.
■ High time pressure: A lack of workforce adjustments leads to time constraints, reducing the accuracy of invoice reviews and increasing the likelihood of duplicate payments.
■ Unfamiliar VAT regulations abroad: Expanding into new markets involves new tax compliance requirements. Ignorance of local tax laws can result in financial losses, such as failing to claim VAT deductions on eligible expenses.
Conclusion:
Although duplicate payments can never be entirely eliminated, they can be significantly reduced through appropriate measures. A zero-error approach is difficult and often disproportionately expensive.
For most companies, the most effective strategy is a combination of preventive error reduction and periodic external audits. This ensures that financial losses from overpayments are minimized and that the accounts payable process remains robust. Regular optimization cycles—such as an overpayment check every two years—can further reduce error rates, increase resilience, and improve overall financial stability.
Founder and Managing Director
