Recovery Auditing Misconception #1 of 4: There aren’t enough recoveries to justify the effort
The short answer:
You don’t know what you don’t know. Especially if you don’t, or can’t look. Often, companies that we speak with have been underwhelmed by the volume of recoveries that traditional profit recovery firms have identified in the past, so they don’t believe there’s much money to be recovered. They don’t realize they’re looking at only the tip of the iceberg. Lavante’s approach delivers expanded levels of recovery because Lavante does a much more comprehensive audit and thus reviews a completely different set of data than traditional firms can. This generates a completely different result.
Unlike traditional firms that primarily review historic client AP records, Lavante’s method focuses on opportunities beyond AP records and delivers a higher yield as a result. Lavante begins with an exhaustive review of vendor AR statement data. Where traditional firms review a sample of vendor records, Lavante leverages its proprietary communication application to correspond with virtually all of client’s active vendors.
Comprehensive vendor communication leads to significant opportunities for profit recovery in three major areas:
1) Although recovery totals are generally weighted toward larger vendors, our experience has shown that the lower 80% of the population (on the basis of spend) represents 61% of the vendors with credits. Since others don’t typically communicate with these vendors, these credits typically go unrealized. (see sidebar)
2) Communicating directly with vendors enables Lavante to manage and clean the client’s vendor file – fewer duplicate vendors leads to fewer duplicate payments. Moreover, establishing the links and relationships between vendors opens the door to negotiate better pricing and terms across what may otherwise appeared to be unrelated vendors.
3) Once Lavante establishes links and relationships within the vendor population, a more comprehensive duplicate payment AP review can be performed.