Guide
Common mistakes in paying suppliers
A business almost never loses money to one large mistake. It loses to an accumulation of mistakes, each too small to justify a check on its own, which together are an amount nobody ever saw.
The five that keep recurring
- A double payment: the same invoice paid twice, usually because the supplier sent it again and it looked new
- Paying for goods that never arrived: forty ordered, thirty-four delivered, forty paid
- A price that went up quietly: the invoice asks for more than the price list the order was built from
- A credit note forgotten: the supplier admitted the error, promised a credit, and nobody followed it
- Paying for something never ordered: a payment request for an item nobody ordered through the system
None of the five is rare, and none of them requires a villain. All of them require a busy person.
Why these five in particular
Because each of them looks entirely correct when you look at one document. An invoice for forty crates is a valid invoice. The price on it is a real price from that supplier. The second payment looks exactly like the first.
The mistake is not in the document but in its relationship to another document, which makes it invisible to any process that checks documents one at a time. That is why they recur in well-run businesses: people do check, they are simply checking the wrong thing.
Which check catches which
This table is the practical half of the guide. Note that the second column mentions no software: these are comparisons that can be made by hand, and the only question is whether somebody makes them every time.
| The mistake | What catches it |
|---|---|
| A double payment | Comparing the invoice number against the same supplier, and after payment matching against bank transactions |
| Goods that never arrived | Comparing the goods receipt against the invoice, rather than the order against the invoice |
| A price that went up | Comparing the invoice against the price list the order was built from |
| A forgotten credit note | A credit that stays open until the money returns, rather than a list somebody remembers |
| Something never ordered | An invoice with no order linked to it |
Three of the five are caught only by comparing three documents rather than two. That is why the goods receipt is the link people are tempted to skip, and also the link without which the other two comparisons lose most of their value.
What no check will catch
Not every gap is a mistake, and that is worth saying in a guide about catching mistakes. A price can rise by agreement on a phone call. A quantity can change by arrangement. A supplier can send a substitute that was agreed.
An automatic check will flag all three exactly as it flags an error, because it sees the same gap. What it cannot know is that somebody agreed.
So the ruling stays with a person, and the job of the check is not to decide but to bring the gap to the table before the money leaves, and to keep the decision made about it.
When to check
Before the payment, not at the end of the month. The difference is not in the amount of work but in the kind of action available at the end of it.
A gap found before the transfer is a decision: pay in part, ask for a credit, or approve it knowingly. The same gap found after the transfer is a correspondence with a supplier who already has the money, and anyone who has run one knows what it costs.
It is also why the confirmation is filed on the invoice rather than in a separate folder: when it turns out two months later that the credit never came, the first question will be what exactly was paid, and when.
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