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Purchase Orders Prevent Duplicate Payments

Purchase Orders are one of the best controls for preventing duplicate payments.  The key control feature of purchase orders is that they link payments to specific vendors.  When purchase orders are incomplete, they do not provide the necessary information to the AP clerk responsible for reconciling the transaction. Illustrations…

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Vendor Invoice Errors and Problematic Purchase Orders

Issues: Vendors may issue erroneous invoices which can be overlooked during payment processing. Health systems may not have a procedure in place for documenting/tracking credits issued to correct such errors. Vendor errors go unrecognized when invoice payments are processed using service, capital and blanket purchase orders.    Examples: An…

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Aligning Accounts Payable and Supply Chain Processes

This issue of Insights highlights key concepts from “A Question of Ownership – Aligning Processes Between Accounts Payable and Supply Chain” presented by William P. Stitt, Principal and Chief Operating Officer of Credibility Healthcare, LLC, at the 2016 Association of Healthcare Resources Materials Management (AHRMM) Conference.  Issues: Synergies between…

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Monitor Expiration of Contracts and Service Agreements

Issues: Service and maintenance agreements and contracts are sometimes paid in advance. Contracts can be modified or canceled before its expiration date. Accounts Payable does not track contract expiration dates for follow up. If Accounts Payable is not informed when a contract is modified or cancelled before its expiration…

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Rebates Present Tracking Challenges

 Issues: Rebates are a challenge to manage because they require a multi-step process to track dollars earned, credits issued and monies paid. Vendors often factor in rebates as a key part of their pricing strategy and structure. Tracking is the primary problem with a rebate program: some vendors pay…

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Non-Original Invoice Copies Lead to Duplicate Payments

 Issues: Duplicate payments is a primary area of concern at most health systems Most duplicate payments occur when at least one payment is processed from a copy or facsimile of the original invoice, which may be fuzzy or hard to read The effectiveness of AP control features is reduced…

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Do Not Create Purchase Orders Based on Vendor-Maintained Data

 Issues: Pharmacy departments use vendor-maintained ordering systems to purchase products In this process, all PO-related pricing data and other terms and conditions of purchase are controlled by the vendor, leaving the healthcare system with few controls over pricing and payment Typical business-practice and vendor-client checks and balances are not…

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What to Document When Making a Return

 Issues: Returned goods is typically one of the largest areas of claims recovered from a TAG audit Effective returned goods processes are necessary to properly account for all returns credits owed to a hospital Significant funds may be lost to returned goods inefficiencies due to a lack of proper…

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Overcharges Occur When Contracts Are Not Promptly Loaded

 Issues: Systems may have many individual contracts and pricing agreements both directly with vendors and through group purchasing organizations Making sure a complex health system pays the correct price for every order involves a three-step process: Determine the correct price and most favorable terms before an order is placed…

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Open-Ended Purchase Orders Require Additional Safeguards

 Issues: It takes effective purchasing controls and careful invoice processing to catch invoices issued in error An open-ended PO can prevent ERP systems from identifying overpayment transactions Overpayments may occur if an ERP system is unable to identify and flag duplicate invoices for review because both reference a standing…

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