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Vendor Statement Audit – A Best Practice for AP Departments (Part 2 of 2)

Thursday, August 26th, 2010

In part one of this blog we discussed how the traditional approach to vendor statement auditing recovers only up to $100,000 per every $1B audited annual whereas a proper statement audit should recover 5-10X that amount.  In this blog I would like to discuss how and why Lavante is able to hit those much higher numbers.

Lavante Recovery is the industry’s premier statement audit product.  The Lavante Recovery application and services are built on the industry’s most powerful platform for communicating with suppliers, collecting AR data, discovering credits and delivering recoveries to clients.  Lavante Recovery targets the entire addressable supplier population without bias and commonly achieves compliance rates above 90%.  It is systematically impossible for any other competitive statement audit process to out-recover Lavante’s process.

Lavante’s outreach includes initial and ongoing requests for AR data as well as follow up requests for non-compliant suppliers.  Follow-up requests alternate by email, fax, mail and phone to maximize exposure and response rates.   Lavante electronically archives all incoming documentation and data per supplier per client for retrieval at any time. Dedicated auditors review all documents for potential credits and communicate directly with the supplier to secure written verification of all claims.  Recoveries are delivered to clients via an on-demand application in weekly batches accompanied by supporting documents and communication detail.

Based on ten years of benchmarking, Lavante has determined that 61% of credit-generating suppliers are distributed throughout the lower 80% of a company’s addressable vendor master file.  Through their expansive review, Lavante delivers clients between $600,000 and $900,000 per every $1 Billion audited.  In addition, Lavante delivers a complete suite of supplier reports and best practice recommendations for vendor file management.

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Posted in Profit Recovery, Recovery Audit, Vendor File Mgmt, Vendor Statement Audit | No Comments »

Vendor Statement Audit – A Best Practice for AP Departments (Part 1 of 2)

Thursday, August 19th, 2010

Since the beginning of the recovery audit industry, traditional firms have focused their attention on client AP data to perform recovery reviews.  Statement auditing (the practice of collecting and reviewing supplier AR records) required a different process than a client-side review.  Due to manual labor and outreach requirements, traditional firms review only a small subset (the top 5-20%) of the addressable supplier population. As a result, traditional firms report that statement audit claims comprise only 5-10% of their total recovery effort.  These firms also report overall recoveries of approximately $1 Million in annual recoveries per every $1 Billion audited, which means that traditional firms are recovering only up to $100,000 in statement audit claims per every $1 Billion audited.  This total is a very small percentage of the true opportunity of a properly executed statement audit. 

  

A statement audit, done correctly, should include a review of all addressable suppliers and will uncover 10–20 times the statement audit claims of a traditional recovery audit.  A specialized statement audit firm focuses their attention on nuances of the vendor master file as well as the AR records of the individual supplier.  A proper statement audit includes a thorough review of supplier relationships and should also provide some mechanism for patching the missing and/or inaccurate data that commonly plagues a company’s supplier records. 

Specialized statement audit firms must perform two-way communications with a massive volume of companies and should demonstrate an automated method for soliciting, tracking, re-soliciting (if necessary), collecting, archiving, retrieving, and performing workflow for supplier AR records.  An ideal system will also include consideration for leveraging many different forms of outreach (email, phone, fax & mail) to maximize compliance. 

Considering the communication and work flow demands of a proper statement audit, it is understandable why traditional firms cannot perform the large scale review.  Traditional methods for reviewing client-side data simply do not translate into a successful statement audit.   Only a firm specializing in statement auditing should perform the review.

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Posted in AP Industry, Profit Recovery, Recovery Audit, Vendor Statement Audit | 1 Comment »

IAPP FUSION Product Launch

Wednesday, May 12th, 2010

Lavante CEO, Joe  Flynn successfully got Lavante Connect kick-started in front of the “IAPP Emerging Technology Tour” in the FUSION 2010 exhibit hall on Tuesday Morning filled with approximately 1600 financial professionals.  Earliest reactions have been fantastic and FUSION attendees have been flooding the booth the review a demonstration of the new products and platform.

Sherry DePew followed  Joe’s lead with a standing room only workshop where she discussed portals and demonstrated our product. She was held after her session by attendees with lingering question for about thirty minutes.

This is a game changer!  Proud of the new developments and proud to be a Lavantine!

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Posted in IAPP, Recovery Audit, Supplier Information Management | No Comments »

Payment Fraud Remains an Issue, Survey Shows

Friday, April 30th, 2010

It may be small consolation, but if your organization experienced some sort of payment over the past year, it certainly has company. Nearly three-quarters of companies – 73 percent, to be precise – experienced attempted or actual payment fraud in 2009, according to the 2010 AFP Payments Fraud and Control Survey.

What’s more, thirty percent of respondents said that incidents of fraud at their organizations increased between 2008 and 2009.

Perhaps not surprisingly, checks remain a trouble spot. In fact, checks played a role in nine out of ten organizations that had experienced fraud. That put checks far ahead of other payments vehicles, such as ACH debit, which was cited by 25 percent of respondents, and consumer credit and debit cards, where were cited by 20 percent of survey participants.

In their efforts to thwart would-be fraudsters, organizations increasingly are moving to electronic payments. In fact, 88 percent of respondents indicated that they were boosting their use of electronic payments in B2B transactions; 83 percent were doing the same with business-to-consumer payments.

Despite the increase in fraud, not all is doom and gloom. Of the organizations that experienced attempted or actual payments fraud last year, a large majority – 70 percent – escaped without any financial loss. Another 18 percent had losses of less than $25,000.

That’s not to suggest this a time for complacency. For 53 percent of respondents, the potential fraud loss could have topped $25,000. Clearly, effective fraud controls can pay off.

Posted in AP Industry, Recovery Audit, Technology | No Comments »

Vendor Credit Recovery

Saturday, April 24th, 2010

Vendor credit benchmarking from the front lines.

Every industry has its fair share of reports, surveys, data points, and sound bites.  The Profit Recovery industry is no different.  In the last few years we have performed quite a bit of analysis and benchmarking to uncovered some compelling data  about recovering credits from your vendors and suppliers.

From a survey of over 100 clients and prospects we have discovered that most traditional recovery providers sample only the top 5-20% of your vendor population when reviewing vendor-side credits?  Our survey elaborates (based on feed back from AP professionals) that without the aid of a communication compliance engine (Lavante is the only firm with such an app.)  traditional statement audit reviews, whether they are done by third party firms or by internal efforts simply cannot support indepth vendor penetration with manual methods and cap out at 20%. 

Our vendor credit recovery benchmarking demonstrates that 61% of vendor credit opportunity resides in the lower 80% of your vendor file.  To put it another way, traditional manual methods, will find, at most, 39% of credits available to you.

Another fact you may not be aware of is that 37% of vendor-side claims come from product returns.  This category is by far the largest we are tracking.  And it has huge implications not only to the existing process you have for returns transactions, but also on where your profit recovery audits should focus.  In contrast, we’ve found that only 9% of vendor-side claims are the result of duplicate payments.  Keep in mind that hese numbers vary depending on industry.   

Some other interesting metrics indicate that the average claim amount from a vendor credit recovery review is $817.  (with a range of about $400-$1200)  We have also discovered that the actual recovery potential for vendor credit recovery is $600,000 -$900,000 per $1Billion in addressable spend volume. Although we are the only recovery provider to project recoveries below the typical industry benchmark ($1M per $1B in spend) we feel confident that this carefully calculated metric passes both the scientific test and a gut test as well.  When we approach new prospects and we explain that depending on their industry they stand to recovery within this range that data is always well received based on what they have actually seen from other firms and not what they have been promised.

Based on our discoveries, we have also determined that for every month you do not perform an in depth automated vendor credit review you risk  losing $63,000 per billion dollars of spend with no chance of recovering it.  While $63,000 may not be a huge amount for you, if you spend multiple billions of dollars, and delay just a quarter’s time, that $63,000 figure becomes a large sum of money.

If you have any more questions about our benchmarking survey please join the conversation…

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Posted in AP Industry, Profit Recovery, Recovery Audit | No Comments »

Our Latest News: Recovery Audit Technology Leader Lavante Continues Record Growth

Saturday, April 24th, 2010

On Wednesday, we released a straight forward news story about our Q1 success: Recovery Audit Technology Leader Lavante Continues Record Growth.   The story reported that we are growing quickly and that we are moving to a new larger facilty in San Jose.  The story was very direct and did not elaborate on too many details.   I was suprised by a volume of incoming emails and calls asking for more details.  On Wednesday alone I heard from three clients and three reporter/analysts.  More emails and calls continue to make there way in… 

I’d like to elaborate a little bit more on the story for the Lavante watchers in the audience.   Our new grade A facility is in the Santa Teresa area of San Jose and the property manger tells me it is over 26,000 square feet!  I do not want to risk a blister trying to walk through and measure it myself.  We plan to have our entire operation moved over in a couple months, but we are in the middle of three major trade events in the next month and we are rolling out a brand new product in three weeks so some of us are having a hard time packing our boxes.  (uh-oh… more phone call and emails from that “new product” teaser I am sure)

Regarding new business… how do I put this?  As the articles inicates, Q1 was a record quarter, but we’ve nearly already beat it in April alone.  Yes you read that correctly.  Clients are closing more quickly and they are growing larger in size…  In 2010 we have begun workng with three of the largest private companies in the U.S. and our new public clients are averaging a Fortune rating of F297.

I hope that answers any questions, but I am always available to discuss further.

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Posted in AP Industry, Profit Recovery, Recovery Audit | No Comments »

Recovery Auditing Misconception #3 of 4

Friday, April 23rd, 2010

Recovery Auditing Misconception #3:  Profit Recovery is not a current Priority and I can afford to wait. 

The Short Answer

You may not be aware of it, but credits age and disappear over time. Once gone, they can’t be recovered. Our results show that delaying Lavante’s review could cost your company $62,500 per month for every billion dollars of your annualized spend. That’s for every month you delay. 

Why?

Lavante’s core product focuses on the AR balances of your vendors and discovers credits that you didn’t even know existed.  However, vendors are constantly reconciling and cleaning their AR records.  Unapplied credits have a “shelf-life:” as they age and go unclaimed, they’re applied by the vendor to offset unrelated disputed invoices or unearned discounts, or eventually written-off.  Unlike client AP records, there often isn’t a historic database that preserves ledger entries after they have been removed.  Thus, if a vendor removes a credit from their AR record, then it’s usually lost with no possibility of recovery. 

Lavante’s exhaustive benchmarking metrics point to a number of reasons why it is vital to begin the review immediately. 

  • Based on over a million data points, Lavante research suggests that after an open credit has aged over 90 days, you have less than a 20% chance of recovering that credit without third party intervention.  This subset of credits that age beyond 90 days accounts for potentially millions of dollars on an annual basis and should be part of your existing standards for managing working capital.
  • Lavante recovers for clients a consistent range of between $600,000 and $900,000 per every billion dollars in addressable spend. If not audited, this is the amount lost annually (see the figure below) due to vendor aging activity. This recovery history suggests that every month you delay reviewing these dynamic vendor records, you stand to lose $63,000 per billion dollars you spend (1/12th or 8% of your potential annual recovery opportunity).  

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Posted in AP Industry, Profit Recovery, Recovery Audit | No Comments »

Accounts Payable Best Practices Closer Than You Think!

Sunday, April 11th, 2010

Accounts payable best practices are closer than you think.  Recently I was asked to help review a handful of workshop presentations that are going to presented at an upcoming association event.  I am not exactly an expert like the folks that submitted the presentations, but I could be counted on the make sure the proper format was being used and I spotted a couple typos along the way.  In my review I was struck by the high quality of material that was submitted (and will be presented).  My sample of presentations covered avoiding fraud; enterprise software upgrades, p-card programs, profit recovery auditing, staff development, among a few other items.

A thought occurred… it is very common for associations to sponsor events where a large volume of workshops are presented for pure peer-to-peer education purposes.  Sadly these presentations are one-time events, but the value they present is relevant for many months or years beyond the show at which they are featured.  I think folks in the AP field that are looking for answers and resources to help solve business problems can  rely on large associations.  Any person looking for material need only call into their preferred association and ask for the person that oversees education for the association and you will likely be connected with the person that oversees workshops, panel discussions and presentations.  That person will be connected to a number of professionals with very insightful things to say about nearly unlimited business issues.  In addition, that person will also know what the feedback is like about the speakers and can point you in the right direction.

Even if you do not attend national or regional events and you have not been exposed to peer-to-peer educational seminars you are still only a couple phone calls away from someone who has not only accomplished what you are attempting to do at work, they have become an expert on the subject and they are now trying to educate others.    Just remember that when you become the expert to return the favor.

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Posted in AP Industry, Industry Associations, Profit Recovery, Recovery Audit | No Comments »

Recovery Auditing Misconceptions #2 of 4

Sunday, April 11th, 2010

Recovery Auditing Misconceptions #2 of 4:   I already have a recovery auditor so I cannot use Lavante now.

The Short Answer

The Lavante Profit Recovery product is complementary to alternative recovery solutions.  Whether you are currently engaged with another provider, wrapping up an engagement, or planning to engage in the near future, Lavante’s unique offering is effective alongside a competitive firm or as a standalone engagement. The result in either case will be increased overall cash recoveries.

Why?

Traditional recovery audit firms specialize in client-side AP auditing.  The techniques needed to perform AP auditing are not the same as those needed to perform two-way communications with a virtually unlimited number of vendors.  When it comes to vendor contacts, traditional AP audit firms offer a cursory review at best and focus on a small subset of vendors.  Lavante does encounter instances when a client’s existing vendor review is contributing to the overall recovery effort, but in every instance where Lavante has been awarded the engagement, the vendor-side recovery dollar total has increased by a multiple while adding a comprehensive vendor file management component.

Lavante has the ability to penetrate much more deeply into a client’s vendor base due to three main factors.

1)      Our Proprietary Communication Application:  Lavante has developed a proprietary software application to perform automated, ongoing communication with virtually an unlimited number of your vendors.  Sophisticated tracking and workflow adjusts the communications process based on responders and non-responders, helping drive compliance from the largest proportion of vendors possible.

2)      The Lavante Supplier Network:  Lavante has built and maintains a supplier network that is leveraged constantly to help update client vendor records and pursue communication with non-respondents.

3)      Vendor File Management Services:  Lavante staffs every engagement with a team of experts to review vendor documents and facilitate communication efforts with vendors.  ’What’s more, our vendor analytics software helps spot vendor relationships that are not otherwise obvious. By combining automation with persistent and experienced auditors, vendor compliance rises dramatically. 

Because no other company in the industry has the same vendor focus and reach that Lavante does, it’s possible to work alongside an existing audit firm with little overlap. Overall, audit recoveries will rise dramatically as a result. Of course, Lavante can also perform the complete audit and totally replace another audit firm’s efforts.

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Posted in AP Industry, Profit Recovery, Recovery Audit | No Comments »

Profit Recovery & Easter?

Saturday, April 3rd, 2010

What do Profit Recovery Firms and The Easter Bunny have in common?

When I was young on Easter morning my parents used to hide plastic eggs around the house with little surprises in them. Some eggs had candy. Some eggs contained dental floss in them (I didn’t care for those eggs so much) and some eggs contained money. (I liked those eggs the most)   As the youngest of four siblings by a couple years there were a few years when I was the only child still taking part in the hunt. The older kids had given up the hunt in favor of helping my folks prepare and hide the eggs. And boy did they get into it.  They hid more eggs in more ridiculous locations, but keep in mind that meant more money… and it was all mine.  I simply had to find it, and that was no small order.  I was now one person in search of four dozen eggs spread across the entire house. I remember one year in particular when I had searched for almost ten minutes and discovered only a single egg.   So… what did I do?

A) Look in a few obvious places find a small number of eggs and quit

B) Diligently go through the entire house and locate all of the eggs 

The same multiple choice can be applied to how you want your profit recovery audit firm to approach recovery. When the decision is about maximizing your cash flow recapture how can anyone settle on sampling as opposed to a steady and thorough approach. Every room, every corner counts.

If the moral of the story is not clear, traditonal AP recovery practices sampling, especially when reviewing vendor and supplier AR records.  Lavante has built a proprietary soaftware application that communicates with your entire population of vendors and maximizes recoveries for clients of all sizes across all industries.  That will buy your AP department a lot of chocolate eggs.

Happy Easter Everybody!

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Posted in AP Industry, Profit Recovery, Recovery Audit | No Comments »

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