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).