A key benefit of an accounts payable audit is the money that will likely be “found”. It is estimated that for every billion dollars of payables there can be a million dollars in overpayments! Whether your own recovered bucket of money is big or small though, the non-financial benefits can be just as critical to the success of your business.
Over the years, Broniec Associates has performed recovery audits for scores of industry segments. They all, however, had the same goal when they approached us for help. They wanted to find overpayments and the operational gaps that caused them in the first place.
Identify Operational Gaps
Operational gaps develop over time. It is fairly common for an accounts payable department to experience department sprawl. As technology changes, the department grows, or new branches get tied into the system, it is difficult to remain efficient. Sometimes it takes a third party to come in and evaluate how the procure-to-pay function is executed and offer solutions.
Keep Corporate in Control
When overpayments occur, it is often the result of too many hands in the pot. In one case, we helped a private university that was using several non-integrated payment systems which were accessed by various departments in the school. We helped them move from a decentralized accounts payable process, to a consolidated billing system. This gave them the control they needed to lessen the duplicate payment risk. A similar situation occurred with a hotelier operating over 70 hotels…each with separate checking accounts…needed to regain corporate control.
Ensure Contract Compliance
A lot of time and attention goes into preparing contracts. They are legal documents that are read and signed after some negotiation with vendors. But, then, many organizations lose sight of what those contracts provide. We actually recovered over $500,000 for a health insurance client after a careful manual review of contracts. In their case, they had been billed for project hours that should have be free according to the contract and were never given the agreed upon volume discounts.
Cut the Risk of Fraud
When your department isn’t running efficiently, it is left wide open to fraud. Accounts payable audits are designed to find those weak spots and any red flags.
Prepare for State Audits
AP Audits are voluntary, but when the state wants to look at your books, you don’t have a choice. You can, however, prepare in advance by performing regular recovery audits. Companies like Broniec Associates offer contingency-based audits, so fees are only assessed on recovered funds. As a bonus, you get to walk away with a professional evaluation of your internal processes and the current best practices in Accounts Payable.
As you can see, you get a lot from a Recovery Audit that goes beyond the overpayments themselves. And, since it can be done on a contingency basis, there is really no down side. What you really get is tighter, more efficient processes that maximize your cash flow and while minimizing risk.