A key benefit of an accounts payable audit is the money that will likely be “found and recovered”.
Businesses are constantly transforming and changing and these changes can lead to overpayments. At the same time, businesses do not have the luxury of extra staff to perform a thorough internal AP Audit review. 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 45 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 and recover overpayments, learn root causes and operational, identify problem vendors and learn way to resolve and eliminate the potential for future overpayments.
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.
Gain Peace of Mind and 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.
Identify Problem Vendors
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 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.
Reduce 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.
Compliment to Internal Audit
The role and responsibilities of an organizations internal audit department has grown, due to increased scrutiny of business security and risks, as well as ensuring your organization is compliant with governing Acts overseeing financial reporting, such as Sarbannes-Oxley. Often Broniec is engaged by internal audit. staff, as while they can provide an independent assurance of an organizations Accounts Payable controls, processes and operating efficiencies, they most likely only have time, resources and tools to perform a “sample” review. By engaging in a comprehensive Broniec Accounts Payable Audit, Internal Audit can gain insights and learn of risks which will provide the team a clear direction of areas to focus on, which would bring the most value to your organization.
Recoup Lost dollars
A key benefit of an accounts payable audit is to identify and recover overpaid dollars (hidden profits) from your suppliers/vendors. It is estimated that for every billion dollars of payables there can be a million dollars in overpayments! If your vendors are holding onto your money, would you want your rightful money returned to you?
Over 45 years, Broniec Associates has performed recovery audits for scores of industry segments, however, they all had the same goal when they approached us for help. They wanted to find & recover overpayments and understand the operational gaps that caused them in the first place.
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, while minimizing risk.