USA correcting coding errors after payment has been issued

[2lindamar]

Okay here's the scenario. Say you are a large corporate institution. A vendor submits an invoice for payment of a substantial amount , and it is processed and paid. Later you realize that due to an internal code error, the payment was processed and paid from the wrong account. Because this is an internal error, it is not considered an over payment to the vendor.

Here's my question: would it be considered standard accounting practice for such a business to contact the payee/vendor (as much as 1 year following receipt of payment) and request that the payment be refunded so that it can be reprocessed and paid from the correct account?

I am not an accountant, but it seems like there must be a way to adjust for such errors internally. I can't fathom that a multi million dollar corporation would need to go after an independent sole proprietor ( without millions of dollars) to correct an internal accounting error.

If this is NOT a standard accounting practice, what might be the potential benefit to the corporation for collecting such a repayment? If I added the words; "healthcare" and "insurance company", would that help add relevant context to the situation? (i.e. could this accounting approach help a company that might need to demonstrate/document attempts to collect overpayment refunds in order to remain in compliance with federal contracts?)

I hope someone can help shed light on what (to this non-accountant) appears to be at best, a dubious accounting practice.

Thank you for taking the time to read and respond.

 

[bklynboy]

You just make an entry in your system to correct the code. Its that simple. Also this is not an accounting issue but a control issue that needs to be addressed..

 

[kirby]

I'm going to assume you work for the independent sole proprietor. My response to the large company - as bklynboy suggests would be to tell them to just post an accounting entry. I would not refund the money. Even if I agreed to a refund, I would insist on being given the repayment check as a bank cashiers check before i issued a check to the large company.

 

[2lindamar]

Thanks for your responses- Another quick question, does it make a big difference if the two different accounts are considered "separate entities"? That is the reason I am being told they cannot make the adjustment internally. The website says that this company is "A non profit (lol) organization with 4 separate plans in 4 bordering states". So, each state has it's own "plan" but the organization at the top is the same. So would that make a difference?

 

[2lindamar]

Oh! one more question for Kirby. Why would you insist on a cashier's check for the repayment?
Thanks again!