What is an Accounts Payable Recovery Audit? Quite simply, it is a review of your Accounts Payable historical data which will identify erroneous overpayments and under-deductions made to your suppliers. The areas of audit recovery include duplicate or wrong payments, open/unapplied supplier credits, payment term opportunities, unrecorded accruals/rebates/allowances, pricing errors, transportation overbilling, escheatment avoidance, real estate lease overbilling, among other areas.
Why should my company conduct an Accounts Payable Recovery Audit, we have great controls, people and systems? Why, because no system or individuals operating within your procure to payment cycle are 100% error free. The opportunity to circumvent established controls exists in every ERP and legacy system. Communication between suppliers, procurement, receiving and Accounts Payable is effective most of the time but not all of the time. While your systems are designed for the efficient payment of invoices, in an environment with a large volume of transactions, a small percentage of profit leakage inevitably occurs. These dollars can add up to a significant amount and represents pure lost profit.
So what does an Accounts Payable Recovery Audit entail and what are the costs? It really is a simple and painless process and the best part it is 100% contingency fee based which means there is no cost until you actually receive economic benefit for any realized profit recovery. The review is a backward look at historical supplier spend utilizing a comprehensive recovery audit process and proprietary software and thus does not interfere with your day to day activities. The involvement of client staff is minimal and data collection is a simple dump of certain files, no special programming is required. Supplier communication, chargeback creation and collection are handled by the recovery audit firm.
What should I expect from an Accounts Payable Recovery Audit? The Accounts Payable Recovery Audit will identify and recapture lost profits due to errors within your procure to payment environment. On average, recoveries can range from .05% to .1% of revenue or $500 thousand to $1 million for firms with $1 billion in revenue. Additionally, the audit will identify system or procedural weaknesses and make recommendations of business process improvements.
So what’s the catch? There really is none. The engagement is 100% contingency fee based and requires minimum time to support the audit. It is a collaborative effort that maintains confidentiality of sensitive information and respect for your supplier relationships. Some believe the true benefit of the engagement is the professional Management Report that is delivered at the conclusion of the Accounts Payable Recovery Audit which includes details of the findings, recovery audit opportunities and recommendations on how to avoid future profit leakage. An Accounts Payable Recovery Audit is a recommended best practice for most major companies.