Large enterprise accounts payable organizations manage millions of payments to thousands of vendors each year. Business changes including mergers and acquisitions, consolidation, and centralization, as well as new systems and automation mean that 100 percent payment accuracy is nearly impossible – even for AP organizations with the strongest controls. To identify the highest percentage of anomalies and recover the most dollars, it is necessary to investigate both a company’s internal AP data and processes, as well as its suppliers’ AR data and processes.
A statement audit is the practice of reviewing the AR accounting records of a company’s suppliers for un-offset credits. 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 than the traditional recovery auditing approaches. Implementing a comprehensive statement audit means managing communication and outreach with mass volumes of suppliers and requires an automated solution to handle the supplier data, orchestrate the outreach, and collect and manage incoming information from this high number of suppliers.
The following is best practice guideline based on research conducted by PayStream Advisors, and included in the recent industry white paper, Statement Audits: An Untapped Source of Dollars For Your Company. These steps illustrate how to implement the most successful statement audit process at your company and drive more recovery dollars to your bottom line:
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1. Start with good supplier data: In order to communicate with suppliers, the first step is ensuring you have the right data and communication preferences. Supplier data deteriorates quickly, so it’s no small feat to keep your data clean and up-to-date. For an effective statement audit, you need a system that will manage supplier data, cleanse and identify issues, enrich with external data, and ensure contact information and communication preferences are up-to-date at all times.
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2. Drive supplier compliance across multiple communication channels: Supplier compliance is an ongoing process; contacting supplier just once is not enough. The statement audit process is analogous to collecting past due balances – outreach statistics show that multiple touches are required to drive maximum compliance. Using an automated, pro-active, multi-channel approach to drive compliance is critical to a statement audit.
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3. Use technology to capture and validate supplier statements: With the mass volume of outreaches, statements and supporting documents, and verifications involved in a statement audit, technology is essential to tracking and managing the process. Technology can ensure there is an easy way to track, manage, analyze and verify information sent to and received from your suppliers.
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4. Proactively identify accounting anomalies and root causes: Visibility into transactions and credits across your supplier base enables you to identify accounting anomalies that occur after a transaction is settled. For example, expired products that are returned for credit after a three-way match will be caught by a statement audit.
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5. View statement auditing as an ongoing process, not a project: Transactional errors with suppliers occur every day. A statement audit helps you find anomalies that your organization does not resolve in the first 120 days. Identifying and resolving issues on an ongoing basis, vs on an annual or biannual basis helps you to maintain better processes and uncovers more money left with your suppliers. A rolling four month statement audit is a best practice.
Please add your ideas about how statement audits currently work at your company, and your thoughts about these best practice steps. And, be sure to subscribe to The HUB for automated alerts when new content has been posted.
