I've seen this pattern repeat across dozens of small and mid-size companies: a process that's been in place for years, nobody has questioned it, and thousands of dollars are walking out the door every month in duplicate payments, missed discounts, and processing inefficiency.
Here's how to identify yours and what to do about it before your next close.
"Beware of little expenses; a small leak will sink a great ship."
Benjamin Franklin
The Daily Check-Run Trap
The most common mistake I see: small companies cut checks daily.
Every time an invoice lands, someone writes a check. It feels responsive, it feels controlled. But it's neither. What you're actually doing is increasing your bank fees (one check run costs less than ten), multiplying your reconciliation work, and losing any ability to batch-verify payments before they hit the bank.
The fix is simple. Consolidate to two or three check runs per week. Then implement positive pay with your bank. This is a verification process where you submit the list of checks you've created to the bank before they clear. The bank checks every check number, amount, and payee against your list. If something doesn't match, it stops. No more duplicate payments getting through because someone processed an invoice twice. No more fraudulent checks in your name.
One client I worked with cut check runs from daily to twice weekly and reduced AP processing time by 40% while eliminating duplicate-payment errors entirely.
Missing Purchase Order Controls
Here's a conversation I had at Valley Day & Night Clinic:
"Who approved this $8,000 medical supply invoice?"
Long silence.
Nobody knew. There was no paper trail. No PO number. No approval signature. Just an invoice that showed up and got paid because the vendor looked familiar.
Medical supply costs were substantial. With no purchase order controls in place, there was zero visibility into who was ordering what, whether pricing was competitive, or whether the invoice matched what was actually ordered.
"If you can't describe what you are doing as a process, you don't know what you're doing."
W. Edwards Deming, Engineer and Management Consultant
We implemented an inventory management system (ENVI) that created a complete chain of custody: every order started with a purchase requisition, moved to PO creation, required approval at a set threshold, tracked what was actually received against the PO, and then matched the vendor's invoice to that PO before payment.
The result? No more questions about who approved it. No more confusion that caused duplicate payments. No more invoices for items never received sitting in accounts payable.
For a small company, this doesn't require expensive software. A simple spreadsheet with a PO template, approval sign-off, and a reconciliation process does the job. The key is documenting the approval and matching invoice to PO before payment.
Invoice Matching Failures
The third leak: invoices that don't match what you ordered or what you received.
A vendor invoices you for 100 units. You only ordered 80. The invoice price is higher than the quote. You received 75 units but haven't marked it in the system yet.
Without a matching process, these inconsistencies slip through. You pay for things you didn't order. You pay incorrect quantities. You miss price overages.
A three-way match is the standard: Purchase Order (what you ordered), Receipt (what arrived), and Invoice (what the vendor bills). Before you pay, these three documents should align on quantity, price, and description. If they don't, the invoice gets held until discrepancies are resolved.
This process caught a recurring overcharge at one client's office. A vendor was invoicing for a service retainer amount that had actually been reduced six months prior. Nobody noticed because nobody was comparing contracts to invoices. One week of focused reconciliation identified $6,000 in overcharges going back six months.
Payment Terms You're Not Collecting On
There's another category of AP loss that doesn't involve errors or fraud. It's the money you're leaving on the table through payment terms you've never looked at.
Many vendors offer early payment discounts. A common structure is "2/10 net 30" — you receive a 2% discount on the invoice if you pay within 10 days instead of the standard 30. That sounds modest. Run the math on a vendor where you spend $80,000 per year and it's $1,600 you're giving back for no reason. If you have five or six vendors with similar terms and you're not capturing any of them, that's a meaningful number that never shows up in any report because nobody looked for it.
The flip side: are you paying late? Many vendor contracts include late payment penalties, typically 1.5% per month on overdue balances. These rarely show up as a separate line item. They appear as a charge folded into the next invoice, or an adjustment your AP team processes without questioning. Over the course of a year, late fees on even a handful of vendors add up quietly.
The fix is simple but requires discipline. Organize your AP queue by due date and discount window, not by when invoices arrive. Invoices where early payment has financial value should be prioritized before those where it doesn't. Invoices approaching their due date should be visible before they become overdue. This doesn't require new software. It requires a consistent process and someone accountable for following it.
How to Find Your Leaks in a Week
Days 1 and 2: Pull your last three months of AP reports and your check register. Look for duplicate invoice numbers, the same vendor paid twice in one week, or unusually high amounts for routine expenses.
Days 3 and 4: Pick your ten largest vendors. Pull their contracts or quotes. Compare the terms to what you've actually been paying. Are prices what you agreed to? Has pricing changed?
Day 5: Review your check-run frequency. Count how many times per week you're running checks and how many individual checks you're processing. Calculate what a consolidated schedule would save you.
Days 6 and 7: Identify whether you have purchase order controls. If not, that's your biggest opportunity. If you do, test them: pull a recent large invoice and verify there's a corresponding PO with approval documentation.
By the end of the week, you'll have a clear picture of where money is leaking. In most cases, you'll find enough to justify a conversation with your accounting team about tightening the process.
What Comes Next
Once you've identified the gaps, the fixes are straightforward. Consolidate check runs, implement positive pay, create POs for all purchases above a threshold, and verify three-way matching before payment.
Most of these changes cost nothing beyond time and discipline. A few of them, like positive pay or an inventory system, have modest fees but pay for themselves in weeks through the errors they prevent.
Need Help Tightening Your AP?
If you're not sure where to start, or if your current process feels chaotic and you need an objective assessment, that's exactly what we do. We'll audit your accounts payable workflow, identify where the leaks are, and give you a clear roadmap to plug them.
Let's talk about your situation