Preventing Duplicate Payments and Fraud · Preventing Duplicate Payments and Fraud. Best Practices...

Master Vendor Files:

Presented by Larry Holmes

Preventing Duplicate Payments and Fraud

BestPractices

The same practices prevent fraud and duplicate payments.

TodayWe’ll Learn …Tips for master vendor file maintenance!How to prevent future vendor list problems!20 best practices for controlling erroneous payments!Best practices for fraud prevention!Regulatory issues for unclaimed property

MasterVendor File

A vendor file is information on all the vendors you work with.

Check out vendors before adding them to the master file.

It should only include vendors you are currently working with.

MasterVendor File

Having people outside accounts payable (AP) in charge can delay payments.!Does AP have the staff to ensure appropriate segregation?!Does AP have the staff so that it doesn’t impact other work?

MasterVendor File Sort through your vendor

file once a year.

Don’t delete anything, just deactivate it.

NamingConventions

Have a rigid naming standard.

Make sure the standard covers all possible issues.

Consider using the U.S. Postal Service standard.

NamingConventions

With spaces and abbreviations, just decide what you want to do and make it the rule.!Do you abbreviate corporation? Will it have a period?!Don’t settle for anything but the company’s legal name.!Should you include leading articles?!With names, should the surname or the first name be first?

NamingConventions

Should you include titles and professional designations?!What about middle initials?!Sometimes names change by the year.

You need to verify change of bank account requests.

Don’t use the contact information on the request.

InformationContact

InformationContactGet contact information for accounts receivable or treasury.!Update contact information on a regular basis.!Make vendors responsible for updating their own information in an online portal.

VendorPortalsA portal is an interactive, online information repository.!Vendors can’t sign up without an invitation.!Portals are used to show payment statuses or for delivering invoices.

VendorPortalsYou have to monitor your vendor portal.

Portals reduce clerical work.

You can buy or build a portal.

Duplicate PaymentsVendors rarely correct

these mistakes.

20 Steps to HandleErroneous Payments

1. Make sure you have a written manual detailing invoice processing.!

2. Train invoice processors thoroughly.!3. Periodically check to make sure

procedures are being followed.!4. Create a detailed coding standard.

Policy & Procedures

20 Steps to HandleErroneous Payments

5. Create a naming convention.!6. Use strong Master Vendor

File practices.!7. Require that vendors use an

invoice number.!8. Require a purchase order number or

name of the person placing the order.

20 Steps to HandleErroneous Payments

9. Pay on time.!10. Double-check rush payment

requests.!11. If you get an invoice after its due

date, make sure it hasn’t been paid.!12. Tell vendors who send invoices by

email and regular mail they don’t need to send the regular mail.

20 Steps to HandleErroneous Payments

13. Centralize invoice receipt.!14. Research before paying

larger invoices.!15. Be extra careful when vendors pay

with more than one method.!16. If payments are made outside AP,

make sure they follow the standard.

20 Steps to HandleErroneous Payments

17. Run all ACH, wire transfers, and purchasing card payments against the check register.!

18. Create an internal review team.!19. Call in an expert to look for

erroneous payments.!20. Constantly review your processes

and look for problem areas.

RecoverPaymentsFind money that has been turned over to the state.

Get a list of deposits made over the last 10 years.

Ask vendors to send you a statement that includes all activity.

PreventFraud

The fraud has to have access to your payment system.

Long-time trusted employees usually commit fraud.

PreventFraud

Motivation

Rationalization

Opportunity

Don’t allow checks to be returned to requisitioners.

PreventFraud

Use best practices to prevent fraud or mistakes.

Require a complete purchase order for each transaction.

PreventFraud

Be wary of vendors threatening credit holds.

Research new vendors.

Segregate duties and do surprise audits.

Prevent EmployeeTheftThere may be some long-

time employees who have access to everything.!It’s a mistake to think, “It can’t happen here!”

Step 1: Establish strong internal controls.

Prevent EmployeeTheft

Step 2: Take segregation of duties seriously.

Step 3: Have a zero-tolerance policy for any kind of cheating.

3 Things You Should Be Doing

1. Mandatory vacations!2. Job rotation!3. Surprise audits

Policies Every Organization Should Have5

1. Have a detailed travel and entertainment policy.

2. Require use of a company credit card for travel.

3. Require receipts for all reimbursements.

Policies Every Organization Should Have5

4. Make managers responsible for reimbursements they approve.

5. Enforce travel and reimbursement policies uniformly.

their job.

FraudMost fraud goes on for 2 years.!Give processors the authority to question any item on any report.

BillingFraud

It’s hard to detect at a top executive level.!Have good vendor set-up practices.!Have a strict segregation of duties.!Have strict oversight over the budget.!Require multiple bids for all items.

There also should have been a requirement for multiple bids for all items, including marketing expenditures.

!!

Look for invoices that don’t clearly say what the service is.Billing

FraudScrutinize odd invoice habits.

There should be documentation to back up the check request.

Check RequestFraud

The rare exception is when there’s a check request for every payment.

Check requests are associated with rush checks.

Without the invoice, it’s easy to have a duplicate payment.

Check RequestFraud

A lot of fraudulent payments are through check requests.

Some vendors commit fraud by threatening AP.

Require documentation for all check requests.!If no documentation exists, require a signature for a high-level executive.!Paper checks are prone to fraud.

Check RequestFraud

Ways toPay

1. Electronic payments, such as ACH!2. Use purchasing cards.!3. Pay from the statement once a

month or week.

CheckFraud

Forgery

Counterfeiting

Alteration

Use positive pay or reverse positive pay.

UnclaimedProperty

States have a dormancy period, usually 3–5 years.!You are required to do due diligence to find the vendor.!Unclaimed property belongs to the state of the owner’s last known address.!Electronic payments almost eliminate unclaimed property problems.

Summary

You may need to make some major changes.

You should be able to implement a lot of what we talked about.

It’s dangerous to resist change because, “We’ve always done it this way.”

Welcome to Master Vendor Files: Preventing Duplicate Payments and Fraud

Q&AWith Larry Holmes

Thank you for joining us today!