PRGX – combining procurement spend analytics and profit recovery

I first met the founders of Etesius 7 or 8 years ago. Their approach to spend analytics was to use their software to analyse an organisation’s spend data – but then to leverage that into a ‘cost recovery’ service, identifying duplicate or overpayments to suppliers. They would work on a contingent fee basis, taking a share of the savings (an example of using a contingent fee mechanism that feels appropriate to us – see our post here).  When I first talked to Etesius it seemed to me that there was a good proposition here for clients - potentially getting a free Spend Analysis done on the back of the savings from the recovery element.

Etesius dropped off my radar, until a few weeks ago, I was contacted by a firm called PRGX – perhaps the most unmemorable company name ever.  (Would Google have been so successful if they’d been called HPLZ?  Or if Apple were known as FTVQ? But anyway..)

I checked them out and it turns out PRGX acquired Etesius last year and the two guys I’d met are still very much involved. So I had a coffee recently with Sajid Ghani, who was the Etesius top man and now holds a senior role with PRGX, and he updated me on the last 5 years or so.

Despite the name, PRGX are actually an interesting business. The parent company came out of the accounting world, focusing very much on “profit recovery” (hence the PR in the name). That included areas such as invoice recovery, fraud identification and speciality work in certain countries in areas such as tax overpayments or healthcare claims audit.  PRGX then acquired Etesius, which added a stronger capability in the area of spend analytics and AP based recovery services.

They’re now positioned in a way that offers a good example of the worlds of Finance and Procurement coming together, something that has been a hot topic around the procurement blogosphere for a while now. And the extension of spend analytics into the world of cost recovery seems a good fit.

We’ll come back and look at their services in more detail in a future post, as their latest products move beyond traditional cost recovery – for instance, looking to cut out over-payments at source, rather than focusing merely on after-the-event audit and identification of errors or issues.  They’re also increasingly offering supporting advisory services, including in the procurement and supply chain area, usually around implementing improvements based on the results of the analysis the provide.

As an example of what can be realised purely from the invoice analytics process, they’ve done some work with UK government departments recently (under a Buying Solutions framework).  As the Cabinet Office reported

At the Department for Transport (DfT) £500,000 has been saved by identifying losses from payments made to suppliers. The report says the DfT commissioned a data analytics company to audit its group procure-to-pay systems, to detect and recover overpayments to suppliers.

The Cabinet Office also disclosed that the Home Office undertook the same exercise and detected £4m in overpayments. Applying these techniques across all departments could identify and recover £264m on just one year of spending, it believes.

Indeed, their work with the Home Office won PRGX the ‘Most Beneficial Contribution by a Small Medium Enterprise’ category of the Home Office Supplier Value and Innovation Awards Programme 2010.

Of course there are many other firms who offer these services, and as always we’d recommend you look at the market. The idea of combining Spend Analytics with the profit recovery side seems interesting; but make sure you find a provider who can fully meet your needs, whatever they are.  Check that they can handle the volume of data you need to analyse, look at turnaround times for analysing the data, and make sure you understand how much input they’ll need from you. Negotiate on the commercial side of things as well - that should go without saying.  And take up references.

Whichever provider is chosen, invoice analysis and recovery looks like something pretty much any organisation could benefit from.  So why don’t more commission this sort of work?

To be blunt, we suspect that fear plays a big role. Fear of what might be discovered – perhaps the hint that the P2P process isn’t controlling spend properly. Or fear that the savings might turn out to be embarrassingly huge, and then there’s a big cheque to write to the profit recovery firm.  But that’s not a good excuse for missing the chance to deliver some cash savings. If you haven't given it a go yet, why not do so now?

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