Critical Supplier Relationships and Audit Guidelines

In any Accounts Payable Recovery Audit, a crucial but often abused component is the protection of the critical relationship clients have with their suppliers.  By its nature, an Accounts Payable Recovery Audit can be contentious and create friction in those relationships.  There are many conditions in a Recovery Audit engagement that could have a negative impact if abused.

The establishment of audit guidelines, that have the agreement and support of both the finance and procurement groups, PRIOR to the start of the audit, is essential to a successful Recovery Audit project.  Overly aggressive claims that are outside audit guidelines are one of the most contentious issues that frustrate both suppliers and procurement. Guidelines should be established and adhered to by Primary and Secondary post audit firms.

Clear Scope and Complete Documentation

The typical scope of an Accounts Payable Recovery Audit includes claims that are 6 months to two years (or more) past the transactions date. It is always a good rule to audit as close to the transaction date as practical for many reasons. Most importantly, it is easier for suppliers to reconcile the claim if the transaction is current. Aged items tend to be more difficult to research, creating angst for the supplier.  Additionally, the recovery of funds on recent transactions can be applied to the financial period where it originated.

The Recovery Audit firm should provide complete and accurate documentation in support of a claim, which will allow an efficient and speedy confirmation by the supplier. It is also important that the audit firm respond timely and professionally to all supplier correspondence. If communication from a supplier requires additional research, it is helpful to acknowledge receipt of their initial correspondence giving them an approximate date of a follow up response.

Begin With Open Communication with Stakeholders

Good communication with all client stakeholders will minimize the escalation of issues that may develop.  Your supplier is not be the “enemy,” but rather a partner who helps the Recovery Audit team to resolve past inaccuracies and potentially avoid future errors. AP Recovery Audits can facilitate better communication between customers and suppliers, by reducing the friction that exists related to unresolved accounting issues – on both sides of the transaction.

It is important to keep in mind that a successful Accounts Payable Recovery Audit not only involves the recovery of funds, but also the preservation of valuable supplier relationships. To achieve this, it’s crucial for the audit firm to maintain transparency and fairness in their claims, adhering to the agreed upon audit guidelines and avoiding overly aggressive claims.

Finally, it’s important to understand that the supplier is not the enemy, but rather a valuable partner in the audit process. By working together, both parties can benefit from the audit and build a stronger, more positive relationship.

Strategic Audit Solutions Inc., a leading provider of Accounts Payable Recovery Audits, has a formal “Commitment to Client Supplier Relations” process that is followed throughout every audit project. This includes communication protocol, claim approval process, claim timeline, communications procedures, and a dispute escalation process. For more information about how we value your supplier relationships, or to learn more about us –  get in touch here.

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