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How to avoid mis-payment and overpayments in the accounts payable department

Many billions (USD, EUR, RMB) are lost each year in mis-payments and over payments by accounts payable departments world-wide. The large majority of these losses are not fraud; it is the administrative errors. It is not easy.

Validating the account information: NACHA survey
One of the first problems is how to validate the payee's account. NACHA in the USA is seeking corporate practitioners to participate in its Account Validation Industry Survey. They are looking at the five primary models used to validate account information:

  • micro-deposit or trial deposit, in which the account number and the routeing number are validated by sending micro-deposits to the account
  • instant account validation, in which the customer provides his online banking login credentials, which are then used to log into the account and validate the customer check verification
  • services, in which a database and/or another proprietary solution is used to validate the accuracy of the account information of a cheque
  • ACH pre-notification entry, in which a non-monetary entry is initiated by the originator to a receiving depository financial institution prior to the initiation of the first credit or debit entry to a receiver's account
  • debit card authorization, in which a request is sent using the card number provided by the consumer to confirm that the demand deposit account number is attached to the card.

NACHA is requesting feedback from the treasury and finance industry about its current use of account validation services, as well as input on detailed requirements when considering those services for ACH payments.

Safeguarding Disbursements Report
The Accounts Payable Network has just published a report 'Safeguarding Disbursements: A Technology-Enabled Approach to Overpayment Detection and Prevention' which focuses on the duplicate payment dilemma which is the most common type of payment. The underlying causes of duplicate payments can be wide-ranging, including:

  • error-ridden vendor master files
  • invoice process flows
  • ERP systems limitations policy
  • changes and misunderstanding of current policy
  • rushed payments when errors occur
  • poorly enforced process practices.

Although AP departments AP departments typically conduct audits after disbursements have been made to uncover costly duplicates that can drain a company's cash coffers. What the report recommends is prevention-based continuous monitoring technology. (Not surprisingly as the report sponsor provides such technology.) Such services address several key duplicate payment audit goals:

  • discovery of errors and fraud
  • correction of errors
  • recovery of overpayments once a supplier has been paid
  • enable research on why overpayment made
  • prevention of error repetition through implementation of best practices.

Read more in the full report here.


Overpayment is a major problem in the accounts payable department. Continual vigilance combined with best practices and investment in the latest technologies is essential, not a nice to have.

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