Posts from February, 2011

Ongoing Supplier AR Review, or Statement Audit, as a Best Practice

Tuesday, February 22nd, 2011

Transactional errors result in millions of dollars worth of accounting anomalies for F1000 companies each year. With millions of payments to thousands of vendors, business changes, new systems, and complex purchasing environments, 100 percent payment accuracy is nearly impossible – even for AP organizations with the strongest controls. More and more, AP and Shared Services departments are seeing that to identify the highest percentage of anomalies and recover the most dollars, it is necessary to investigate both their internal AP data and processes, as well as their suppliers’ AR data and processes. Find out more in a free webinar hosted by Lavante and PayStream Advisors -  Register now.

Historically, a comprehensive, ongoing review of a company’s suppliers’ AR records, known as a statement audit, was nearly impossible. The biggest challenge with successfully executing a large-scale supplier AR review is managing communication and outreach with mass volumes of suppliers. A “traditional” recovery audit would review the AR records for the company’s top suppliers to identify open credits on supplier records. This process was performed manually and focused only on the largest suppliers resulting in claims that were around 5% of recoveries found by the traditional audit.

In the past ten years, technology and automation have enabled a new way to approach statement auditing. A comprehensive statement audit targets the breadth of a company’s supplier population to request and analyze AR data which delivers significantly higher statement claims (5-10x) than the traditional approaches. This requires an automated solution to manage the supplier data, orchestrate the outreach, and collect and manage incoming information from suppliers. When executed properly, a supplier AR audit taps into an entirely new source of dollars due back to a company.

Additionally, an automated statement audit can be performed on an ongoing basis for a “rolling” timeframe. This provides a “safety net” for a company’s AP department by performing a supplier AR reconciliation on a regular basis, uncovering a continuous stream of credits. An ongoing, comprehensive statement audit is now considered a best practice.

To learn more about Lavante Recovery register for our blog, visit our Recovery Resource Center.

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Posted in Recovery Audit, Vendor Statement Audit | No Comments »

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1099 Provisions Revised, Not Repealed in Obama’s 2012 Budget

Friday, February 18th, 2011

President Obama released his proposed fiscal year 2012 budget this week. The budget contains a portion of the 1099 provisions from the 2010 Patient Protection Affordable Care Act (aka, the health care law).

As a refresher, the funding provision of the health care law requires all for-profit corporations to issue 1099 forms to vendors from whom they purchased over $600 of goods or services in a tax year. These changes are scheduled to go into effect for all payments made after December 31, 2011. The biggest changes from current 1099 reporting requirements are:

  1. 1099 reporting for payments to corporations (except tax-exempt corporations), most payments to corporations are currently exempt
  2. 1099 reporting for purchase of property (goods, merchandise, supplies, raw materials, equipment, etc.), currently only payments for services require a 1099

Now, back to the budget. The 2012 budget includes the requirement for 1099 reporting for payments to corporations beginning in 2012, but would repeal the requirement relating to payments for property. The proposal is expected to raise about $10 billion over 10 years (vs the nearly $20 billion expected from the 1099 provisions in the health care law).

Meanwhile, the House is moving forward with its bill to repeal the 1099 requirements. The bill was passed by the Ways and Means Committee on February 17 and is expected to go to the House floor this spring. This follows the 1099 repeal amendment attached to the FAA funding bill which passed in the senate earlier this month. If the 1099 repeal bill passes in the House, it will end up in a conference committee to reconcile the differences with the Senate version. The issue that still remains is – how to make up the funding for the health care law.

Sign up for the Lavante blog today to stay on top of the 1099 reporting changes or check out our 1099 reporting center.

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Posted in 1099 Reporting, Tax ID Numbers | No Comments »

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Understanding the 1099-K Reporting Changes Now in Effect

Thursday, February 10th, 2011

Last week, I introduced six initiatives AP and Shared Services could implement to drive organizational efficiencies in 2011. This week, I’d like to focus on the 1099-K reporting changes that went into effect in January of this year.

This change was part of the Housing Assistance Tax Act of July, 2008. It was better known for providing credits to first-time home buyers, but it also created the new 1099-K tax form, which shifts the 1099 reporting for companies that use credit cards to pay suppliers. Under this new ruling, starting in 2011, all financial institutions that process credit or debit card payments will be responsible for sending the 1099 documentation of that year’s transactions to both their clients and the IRS. Before this ruling, the company that received the funds was required to handle the reporting.

The ruling will only impact merchants that have over 200 payments that total over $20,000, but it will have enormous impact on companies of all sizes.

First, AP departments that use automated systems to populate spend files and create 1099 reports will need to remove those transactions that now fall under the responsibility of the third-party funding agent.

Second, it will increase the 1099 reporting responsibilities of all institutions that act as a funding agent for another company. This would include both financial services companies (banks, credit card companies, etc.) as well as outsourced AP companies. As of January 31, 2011, these third party companies will be responsible for collecting W9s and producing the 1099 reports next year.

The reasons behind these changes actually make a lot of sense. It is intended to shift the task of producing 1099 reports to the institutions that actually own the relationship with the entity that makes the payment. In the case of a credit card, the financial services company holds the cardholder information, not the merchant, which is necessary to obtain accurate reporting information.

For a deeper discussion about how to prepare for the impact of 1099 reporting laws, visit the Lavante 1099 resource center.

Posted in 1099 Reporting, AP Industry, Tax ID Numbers | No Comments »

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What Does The Senate Repeal of 1099 Reporting Mean?

Friday, February 4th, 2011

On February 2nd, the Senate voted on multiple topics related to the 1099 reporting requirements as part of the FAA reauthorization bill. The first was a repeal of the 2010 Patient Protection Affordable Care Act (aka, the health care law). The health care repeal failed in a 51 to 47 vote. The second was a repeal of the 1099 reporting requirements that are part of the funding provisions of the health care law. The 1099 repeal passed in an 81 to 17 vote.

So what happens now? Are the new 1099 reporting requirements dead? Well…they’re not dead yet.

On January 25th, I discussed the efforts in the House to repeal the 1099 reporting. The House will need to vote on a bill to repeal the 1099 reporting requirements. If passed, the bill will go back to the Senate. The Senate may or may not tweak the bill and then will vote on the repeal. Then it’s up to President Obama.

What still remains uncertain is how the estimated $17 billion to $19 billion in revenue from the 1099 reporting provision will be offset.

Sign up for the Lavante blog today to stay on top of the 1099 reporting changes or check out our 1099 reporting center.

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Posted in 1099 Reporting, Tax ID Numbers | No Comments »

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TAKE THE INITIATIVE TO DRIVE AP AND SHARED SERVICE ORGANIZATIONAL EFFICIENCIES IN 2011

Thursday, February 3rd, 2011

We’d like to devote this blog to presenting some ideas and actions that AP and Shared Services can pro-actively put in place this year to improve operational and budget efficiencies. I welcome your thoughts on this subject, along with methods or action plans that you will take this year to improve your department’s organization and processes.

  1. Make sure to use the latest technology, and that you utilize all of the functionality to gain the maximum benefits from your investment.
  2. Continuously check to be sure your costs are as low or lower than the competition, which is likely outsourcing.
  3. Review how your department is taking discounts and timing payments to realize the greatest advantage of interest rates in relation to cash flow.
  4. Given the change in financial markets, protecting the institution’s financial rating is increasingly important. Don’t let late payments downgrade your company’s financial rating, which could then increase interest rates. Work within the term limits as suggested above, but make sure you stay current!
  5. Take advantage of every non-capital expenditure that can bring dollars back into the organization. One example of this would be recovery audit processes. If you are using a recovery service, whether it is primary or secondary, make sure that it is paying more than it is costing in terms of resources.
  6. Stay current on changes in the laws that could impact your processes, especially the 1099 reporting changes. Begin working now (if you haven’t already done so), to develop a realistic project plan that will let your company comply with the new regulations.


Here are a few additional thoughts on the looking at technology for AP & Shared Services.

When looking at bringing on new technology solutions, look for ways that it can give you fast, near real-time visibility into root-cause analysis. This means utilizing on-demand solutions that can continuously report on processes as opposed to manual, more project-based engagements. In recovery, this would mean that you have immediate visibility into issues surrounding credits. This gives you two distinct advantages; first you take the credit faster, and secondly, you have can take remedial actions to correct any problems related to the credits.

Another suggestion is whenever possible, leverage technology benefits across multiple areas. For example, when collecting TIN information, see if you can obtain up-dated supplier contact information, updated risk mitigation information, parent/sub reporting, etc. Look at ways the technology can add multiple levels of value throughout your organization.

I’ll continue next week with more discussion around the two 1099 reporting changes. In the meantime, here is a link to several webinars we presented last year that deal with preparing for the impact of these changes.

Posted in 1099 Reporting, AP Industry, Recovery Audit, Shared Services | No Comments »

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