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.