Paying the Wrong Vendor: How Similar Supplier Names Lead to Duplicate Payments

An overpayment to a vendor can happen for surprisingly simple reasons. One of the most common causes is the disconnect between internal vendor numbers and the information that appears on supplier invoices. Distributors maintain lists of their suppliers internally using vendor numbers. These numbers are unique to their system and are not used by the supplier.

When suppliers invoice their clients, they do not use this number because it is unique to the distributor’s computer system. As a result, accounts payable clerks at the distributor must use the supplier’s name to pay the invoice.

This is where things often go awry.

In the case of different suppliers with similar names, the clerk sends a payment to the wrong vendor. Most of the time, these vendors will catch the mistake and return the check. But occasionally, suppliers will assume these payments are legitimate and will apply the cash to a general account.

Of course, the supplier who is actually due the payment will contact the distributor and request payment to be made. The clerk will pay the amount, but the system will not flag an error because of the different vendor numbers.

The result can be a duplicate payment that is hard to detect. The incorrect payment is made against one vendor number, while the legitimate payment is later made against the other. Since the ERP system sees two different vendors, it’s not able to recognize that the same bill has been paid twice. This may seem like a simple error, but at scale it can become a significant source of avoidable payment errors.