Check-Request Form Fraud and Duplicate Payments
Here’s how to avoid them.May 7, 2009
by Mary Schaeffer
Ahh … check-request forms, that ubiquitous tool used to request payments for all sorts of things. Theoretically a solution — by making it easy to request a payment when an invoice is missing. In reality, however, it can create numerous headaches for organizations using them, not to mention causing duplicate payments by the boatload. Here’s a look at some of the problems surrounding check-request forms and a few suggestions on avoiding them.
Check-request forms are used in most organizations to request payment when an invoice is not available or was never provided. Ideally, there should be backup documentation augmenting the check request and providing details regarding the payment amount, the payee and the reason for the payment. Since most payments made on check-request forms will not go through the rigorous three-way match in accounts payable (A/P), the documentation supporting the check request is of utmost importance.
The one exception to this is when organizations require a check request for every single payment. While this is not considered a best practice, some organizations with unique industry or regulatory requirements find it necessary to go this route.
Where Check Requests Cause Problems
Check-requests forms are often used to accommodate rush-check requests. These are one-time payments made to vendors outside the normal invoice-submission process. Typically this happens when a payment is late and an upset vendor threatens to put the organization on credit hold.
Whether the check-request form is used for a rush check or simply because the invoice has been misplaced — if the proper documentation is not attached — the chances for a duplicate payment skyrocket.
Without the invoice to perform the three-way match, the purchase order and receiver (POR) often remain open on the organization’s books. This can blossom into three types of problems:
Fraud can also occur in response to an irate vendor claiming nonpayment. Some vendors have learned if they get on the phone and are generally abusive with A/P staff threatening credit holds, they can sometimes get a harried controller to sign off on a check-request form authorizing the payment. In one of the most egregious examples of this type of fraud, a vendor pulled a screaming stunt every month for 18 months — getting double payment for each one. With murky documentation attached to each form, it was difficult to find the duplicates until the entire vendor file was pulled and reviewed.
Best Check Request Form Practices
Require documentation for every check-request form. If an invoice or copy of an invoice is not available, attach a copy of the contract, an e-mail detailing requirements or whatever is available. Great care should be taken to avoid sending in the form without any supporting documents.
In the extreme cases where no documentation is available, you should require an extra signature of a very high-level executive within the organization, perhaps the controller or the CFO. The person making the request should be ready with a really good explanation for why the check should be issued without documentation. Requests without documentation should be few and kept to a minimum. If there are outstanding purchase orders (POs) and receivers related to these requests, that information should be included on the form so A/P can extinguish them when the payment is made.
If there is an invoice attached to the check-request form, perform the normal three-way match extinguishing both the purchase order and the open receiver.
Check request forms are a necessary evil in today’s accounts payable world. If financial executives work hard to implement best practices, the troubles they cause will be held to a minimum.
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