Continuous AP Audit Captures Two Million Dollars in Supplier Credits

Spend Matters welcomes a guest post from Jeff Wiest, Sr. Solutions Advisor, Lavante

Most companies have unrecognized credits owed to them from suppliers – which can often amount to huge sums of money. To reconcile payments and uncover these credits, AP departments have traditionally taken an annual (or longer) project-based approach to auditing that was ridden with time-consuming, manual processes and allowed some of those credits to go unclaimed.

Figure 1: This graph shows the benefits of an ongoing statement audit process, with credits recovered continuously over time. Graphic courtesy of Lavante.

Now there is a better, more efficient way of conducting AP statement audits resulting in a fast and ongoing capture of credits – continuous AP recovery. This process leverages automation to effectively maintain up-to-date vendor records, and enables on-demand access to this data to quickly identify and recover earned credits.

As an example of the benefits that continuous recovery delivers, a leading pharmaceutical firm recently recovered more than two million dollars in vendor credits. This huge bottom-line bonus was not an anomaly, but rather resulted from a continuous audit model of sound AP credit recovery processes. One of the many benefits of an ongoing audit is the ability to identify credits as they occur in real time and recover funds quickly. In doing so, companies avoid the potential problem of losing the money due to a vendor inaccurately applying, offsetting or retiring the credit. If the pharmaceutical company had waited until the end of the year or even longer to do a traditional project-based audit, a percentage of the two million dollars' worth of credits would very likely have not been visible for recovery at that time.

Using a recovery audit solution that can reach the breadth of your supplier base to effectively maintain an ongoing query of vendor records is an important component of a successful continuous audit. Businesses are always growing and changing, merging and acquiring, making it critical to constantly update vendor records and ensure that new or old vendors are not forgotten – along with the credits that are owed to you. Due to the multitude of vendor master changes in this environment, the remaining credits are not always on the books of the largest, most active suppliers. To recover credits in real time, it's also important to have on-demand access to the audit findings in a format that minimizes the effort involved in applying them.

Companies with a large number of transactions particularly benefit from continuous AP recovery. Since every process or transaction has a percentage of gaps or errors, when an organization, such as the pharmaceutical firm, processes a high volume of transactions every month, these issues can multiply. Once they are identified, there is a real opportunity for recovering large sums of money, and companies like this pharmaceutical firm not only capture this money, but also mitigate risk by examining the root cause of any systemic shortcomings.

Regardless of the unique challenges a company might have with audit recovery, automated, continuous AP recovery that reaches out to the vast majority of the supplier base is a best practice that delivers tremendous results, especially for large companies with a huge volume of transactions where the application of technology becomes even more critical. In finance, visibility and control are everything. By using continuous recovery to gain real-time, ongoing insight into owed credits, a company not only gains significant bottom-line benefits, but also has the control to proactively manage its finances – and there's only upside in that equation.

- Jeff Wiest, Sr. Solutions Advisor, Lavante

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Voices (4)

  1. Ron Siegel:

    “…losing the money due to a vendor inaccurately applying, offsetting or retiring the credit. If the pharmaceutical company had waited until the end of the year… credits would very likely have not been visible for recovery at that time” …We do an annual Statement Audit at work. Are these credits that you are referring to here permanently lost?

  2. Mae Parker:

    It is fantastic what automation has done for business accounting. Having it in use continuously would be a great benefit. Still, there are manual audit procedures which uncover contractual details that may not be apparent otherwise. The best audits combine both traditional and automated processes.

  3. Jeff:

    That is certainly true if the client had chosen to solicit and review statements from their 11k suppliers. The referenced client has utilized Lavante’s automated, patented process to handle the task more efficiently (and electronically) on an ongoing basis.

  4. Lisbeth:

    Or they could read their statements

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