Last month I shared some thoughts about a recent trip to Minneapolis where we presented The Future of AP at an industry lunch & learn session. I’d like to spend a few minutes now with some ideas about a second presentation I made on this same trip, this one at the IFO Northern Lights Chapter meeting. This presentation focused on vendor credits and how to ensure that credits are identified and taken in a timely fashion. Attending the meeting were AP professionals from retail, services, and health care, and across the board, the entire group believed that they needed a process to identify and collect their post-audit vendor credits, as they do not presently have a method in place to ensure that all available credits are identified and collected.
The question of how credits that are over 90 days old have an increased chance of disappearing off the suppliers books began the discussion. This is due to many different issues which Mary Schaeffer, Editor and Publisher of Accounts Payable Now and Tomorrow addresses in her white paper report The Case of the Disappearing Credits. I had the pleasure of presenting with Mary at Fusion 2012 in Nashville earlier this year on this topic, and was able to share with the IFO chapter group a few valuable insights into where these credits go and how companies can mitigate the risk of losing credits that are due to them.
I found the most important finding Mary’s report revealed is that to ensure that you are getting all of your credits you must have an automated process in place that identifies credits on a continuous, timely basis. A periodic statement audit project — conducted once a year or every two years — will miss many credits. An ongoing process, however, will point out the root cause issues responsible for the missed credits – as they happen. If you receive root cause analysis two years after the fact, you will have two years of credits missing. Early discovery of why credits are happening is essential to conducting a best practice statement audit methodology.
I then gave an overview of the Lavante Recovery+ solution, which provides a technology-enabled, continuous recovery audit process. Because the solution is web-based and delivers results in real time, it provides the root cause analysis and vendor compliance statistics that enable our customers to immediately identify what is driving these outstanding credits.
Below is a good example of how customers have used the analytics provided by Lavante Recovery+ to fix process issues and reduce credits. This chart, from a global retail pharmaceutical organization, shows that the organization had an issue in 2010 with returns. Because the company could identify the cause of these credits using the drill-down access to all credit details, they were able to stem the credit tide and eliminate returns as an issue in 2011. Without a continuous process, discovery and resolution of the problem would have been delayed resulting in more return credits that disappear.
To assure that all credits are captured, Lavante Recovery+ performs automated outreach and statement requests to the entire vendor master file (excluding any do not audit vendors) and identifies outstanding credits across the breadth of the vendor population, not the typical top 10 or 20 percent traditional recovery solutions target through a supplier profiling process. This process ensures that the customer is obtaining a best in class solution to their open credits opportunity.
Many of the companies in attendance at both sessions were aware that opportunities existed in their AP processes. They realize that changes are coming their way and that being proactive in addressing the problems provides them the greatest prospect of success. Lavante offers tools and applications that assist in driving the success of our customers by providing them with real-time actionable data and control over the recovery processes.
In the coming months look for more information regarding our recovery and supplier information management solutions. I hope to see you at one of our events or seminars in the near future. In the meantime, please feel free to provide feedback and comments about how you are handling your statement audit process.