Most small and medium-sized firms deal with a large range of customers, suppliers and employees. What this means is that many thousands of transactions could be processed every month, with funds coming in and going out as invoices are paid and obligations met. Each one of those is a source of potential error, which is why an accounts payable audit can dig up some surprising results.
There are more than a dozen different kinds of overpayment or mistaken payment than can happen, one of the most routine of which are duplicate payments – put simply, when an invoice is paid twice. This, and other kinds of overpayment, can occur through accident or fraud. If an audit turns up a significant amount of expenditure due to these unnecessary payments – as it almost certainly will – then recovery audit software enables you to claw back the lost money.
It is only natural that glitches will occur with such a complicated and wide-ranging accounting system. Human error explains most of it: assuming that your payments are processed manually, your accounts department can easily process an invoice twice, or make other mistakes. This is almost unavoidable. Even if it could be fixed, you are not responsible for the invoices submitted by your suppliers. They may not be as scrupulous, and some may even be dishonest, realising that they can get errors past your accounts department that work in their favour.
This may seem like an infrequent occurrence, but the fact is that the average SME could be processing thousands of payments or more every single month. Even if a small percentage of these are false, the result is cumulative and can be huge. Remember, turnover is not the same as profit. Some estimates suggest that between 0.1 and 0.5 percent of turnover is given up due to duplicate payments and other mistakes. If your business is already struggling then this could make all the difference between sinking and swimming. That’s where the accounts payable audit comes in, finding all of those instances in which overpayments have been made, this month and in the past. Then recovery audit software allows you to chase up those suppliers and other parties who have received more than their due from you. In most cases the explanation will simply be that it was a mistake. In a small minority, though, it could be down to fraud, in which case you may want to take legal action, or at least end doing business with them.
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