Overview
A large academic medical center partnered with apexanalytix to improve payment accuracy and strengthen financial oversight across its accounts payable operations. Supporting clinical care, research, and administrative functions requires working with a large and diverse supplier network, resulting in a high volume of invoices flowing through the organization each year.
apexanalytix conducted a recovery audit to analyze several years of disbursement activity and identify duplicate payments, unapplied credits, and other payment errors. The engagement produced strong results while providing valuable insight into payment processes and control gaps.
Challenge
Healthcare organizations often operate in complex financial environments with thousands of suppliers and large volumes of invoices moving through their accounts payable systems. Maintaining payment accuracy becomes even more challenging during periods of system change.
During the audit period, the medical center was migrating to new financial systems, which introduced temporary disruptions to established workflows and controls. When organizations transition between systems, processes often shift, data structures change, and teams may temporarily rely on multiple systems or workarounds to maintain operations.
These types of transitions can increase the risk of duplicate payments, particularly when invoices or payments are processed across multiple systems or when visibility into historical transactions becomes limited. In this case, the migration created conditions where duplicate payments and unapplied credits were more likely to go unnoticed without a detailed review.
Solution
To help the organization identify and recover payment errors, apexanalytix conducted a comprehensive recovery audit covering disbursements from July 1, 2020 through September 12, 2024. This included approximately 1M invoices representing $3B in auditable expenditures.
In addition to the disbursement review, apexanalytix performed a supplier statement review to identify aged credits that had not been applied or refunded, examining 90-day aged credits across 200 supplier accounts.
Results
The audit resulted in $3M in recoveries across 350 transactions, highlighting the financial impact that system transitions can have on payment accuracy. A significant portion of these recoveries occurred closer to 2024, aligning with the organization’s migration to new financial systems. As processes shifted during the transition, disruptions in workflows and controls increased the likelihood of payment errors.
One of the most important findings was the distribution of recovery types. Recoveries were nearly evenly split between duplicate payments and supplier statement credits, an uncommon result that pointed to a clear duplicate payment issue. This analysis also identified key supplier relationships driving a large share of recoveries, including one that accounted for nearly $750,000.
Top 6 Root Causes for Overpayment Recoveries
1. Returns
Example: When goods returned to the supplier for which a credit was not properly communicated to Accounts Payable.
Recommendation: Strengthen communication between operations and AP so returns are shared immediately and require suppliers to issue credit memos promptly for all returned items.
2. Deposit Credits
Example: A company paid a deposit to a supplier for future services, but the supplier did not apply the deposit to later invoices, leaving the credit unused on the account.
Recommendation: Track supplier deposits and regularly review account statements to make sure the credits are applied to future invoices.
3. Different Payment Systems
Example: When duplicate payments are processed using multiple payable systems.
Recommendation: Standardize payment processes across systems and regularly reconcile transactions between them to catch duplicates before payment is issued.
4. Inconsistent Invoice Coding
Example: Invoices are coded incorrectly or differently than expected, which can cause them to be routed, recorded, or paid incorrectly.
Recommendation: Be consistent through clearer processes, better personnel training, and stronger system checks.
5. Duplicate Payments
Example: Duplicate payments identified through the supplier statement review process that are either undetectable in the data or fall outside of the range reviewed in the disbursement review.
Recommendation: Review more supplier statements regularly and improve data reconciliation so duplicates missed in normal reviews can be identified sooner.
6. Supplier Coding Error
Example: An invoice from a supplier was coded to the wrong vendor record due to similar supplier names in the vendor master file, resulting in payment being issued to the incorrect supplier.
Recommendation: Use clear supplier names and simple checks when entering invoices so payments go to the correct supplier.
Conclusion
System migrations can introduce temporary disruptions that increase the risk of payment errors, particularly duplicate payments and missed supplier credits. Without a thorough review of historical transactions, these issues can remain hidden within accounts payable processes.
Through its recovery audit, apexanalytix helped this academic medical center recover $3M while uncovering a significant duplicate payment issue. The engagement provided clear visibility into process gaps and equipped the organization with insights to strengthen controls and improve payment accuracy going forward.
