Recently, we have heard the term “profiling” used most often in association with controversy. It has become a new word to describe the age-old desire to put people or objects in nice, neat buckets or categories while ignoring the reality that life just isn’t that simple. The attempt to extrapolate perceived qualities across an entire group has never worked out very well in practice.
In the finance and AP area the term is now being used by some Statement Audit/Credit Recovery service providers claiming to have determined how to “profile” a client’s suppliers in order to determine which of them are likely to have the most credit transaction activity. They insist that this supplier profiling process produces a group that can be targeted for a “pat-down” in their search for these credits. The service providers would like you to think that this technique allows them to successfully obtain the vast majority of credits available. Furthermore, that their very labor-intensive methods of contacting the remaining suppliers and then getting and reviewing the statements are completely unrelated to this highly selective profiling approach. That is a convenient, but unsubstantiated, argument.
Our experience at Lavante has shown a much different story — that while the top 20% of suppliers by spend do generate a disproportionately large 40% of the credits, a full 60% of available credits are never addressed by a traditional, periodic statement audit approach because it never reaches the remainder.
In this one example from a large health care provider, a full 68% of the credits came from the lower 80% of vendor spend.
The truth is that there is no single formula to determine which of the myriad reasons for credit creation align with a certain supplier profile. Furthermore, credits are issued by any and all of a client’s suppliers.
The Lavante approach is unique in attempting to reach all vendors — unless they are intentionally excluded — using an automated, patented process while setting a benchmark of achieving compliance by those that represent 95% of total spend. We have found numerous credits yet on the books of many suppliers that have $0 in spend during our clients’ most recent reporting period. Few profiling techniques would include these in their search.
Leveraging proprietary technology gives us the ability to automate a continuous connection process with suppliers to update vendor information and identify supplier hierarchies leading to the collection of current statements. Because the Lavante Recovery+ solution tracks vendor compliance, it is easy to perform more effective follow-up with non-compliant suppliers that assure the highest compliance rates possible. We are confident that Lavante finds many credits that have long since been offset and are no longer visible to old-school audit methods which leave substantial time-gaps between efforts.
There is no question that the statement audit process has evolved beyond its outdated origins as a one-time process conducted along with the traditional A/P recovery audit and needs to have separate best-practice attention as an automated, ongoing background solution. We would be happy to show you how it all works. Contact me directly to schedule some time for a demo.
If you are interested in more information on how technology enables the statement audit process, be sure to attend the upcoming webinar, Automating the Recovery Process: How Technology is a Best Practice in Recovery Audit on July 24 with Henry Ijams of Paystream Advisors.