May 30th, 2014

Vendor Statement Audit – A Best Practice for AP Departments (Part 1 of 2)

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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.

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May 8th, 2014

Supplier statement audit can provide important insights before your next sourcing decision

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With the increasing pressures on the profit margins, the efficiency of the procure-to-pay (P2P) processes has been under intense scrutiny within an enterprise.  Typically, Procurement and Finance organizations manage various aspects of P2P processes.  Thus, for a successful execution of the entire P2P process, each organization needs to understand the actions and motivations of the other.  This P2P mindset threads procurement and payment activities into one continuous lifecycle.

With this in mind it is a worthwhile to consider the details of the entire cross-functional process.  At the front end, one will encounter any number of sourcing and procurement activities where highly trained professionals are chartered to identify the best possible suppliers to buy the best possible products or services at the best possible cost of ownership.  At the far end of the P2P lifecycle, one will encounter Accounts Payable (AP) department whose goal, as told to me by one industry expert, is very simple, “To pay the right entity, the right amount, at the right time.”  This is a simplification of course, but generally, all professionals in the space are pursuing some combination of these stated objectives.

Typically these departments are measured, evaluated and guided through an exhaustive suite of metrics.  A number of sophisticated software applications and service providers stand ready to review, in fine detail, how efficiently resources are being spent across commodities, geographies, business units and supplier types.

Having been a practitioner in this space, I can tell you that even though the concept is simple, AP departments face a number of external factors that constantly challenge their ability to achieve transactional perfection.  As a result, the last decade has seen the emergence of “supplier statement audit” which routinely reviews the transactional (read: payment) history of the enterprise to determine the efficiency of the supplier payment processes.  For too long such supplier statement recovery auditing has been confined to the AP suite as a tool for improving the efficiency of Accounts Payable.  With increased focus on the broader P2P process, supplier statement recovery audit results should be more frequently evaluated by the procurement professionals in the context of the larger supplier management process.

There are many benefits to combining supplier statement audit results into the associated procurement metrics, such as supplier scorecards or spend analytics.  Procurement departments have as much or more to gain by evaluating the results of the recovery effort as do AP departments.  Here are just a few ways procurement can gain from incorporating a review of statement audit results:

      • Statement audits can reveal profit leakage, which procurement needs to understand in order to assess larger budgeting or savings opportunities that may exist.
      • Analysis of recovery claims can reveal valuable  insights that will better inform future procurement activities, such as  overlooking the related nature of separate suppliers and missing out on pricing  discounts.
      • Procurement can identify suppliers that routinely  commit transactional errors and incorporate those suppliers’ lack of accuracy in  the supplier scorecard for a more holistic supplier evaluation.

As a best practice, build in a process to review supplier statement audit results before your next supplier strategy review.  It will provide important insights for managing suppliers.

I would welcome your thoughts on this topic.

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February 28th, 2014

Recovery Auditing Misconception #4

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Recovery Auditing Misconception #4:   I don’t have the time or resources to support this process The Short Answer: It takes very little of your time or resources to support a Lavante recovery audit.  All you need do is send a basic vendor file and dedicate one employee for typically an hour per week. How is Read More…

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February 14th, 2014

Recovery Auditing Misconception #3 of 4

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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 Read More…

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January 26th, 2014

Recovery Auditing Misconceptions #2 of 4

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Recovery Auditing Misconceptions #2 of 4:  I already have a recovery auditor so I cannot use Lavante now. The Short Answer The Lavante Profit Recovery product is complementary to alternative recovery solutions.  Whether you are currently engaged with another provider, wrapping up an engagement, or planning to engage in the near future, Lavante’s unique offering Read More…

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January 5th, 2014

Recovery Auditing Misconceptions #1 of 4

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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, Read More…

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December 18th, 2013

Lavante’s Joe Flynn named to The Institute of Financial Operations Board of Directors

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The Institute of Financial Operations has named its new board of directors for 2014. Board members beginning terms in 2014 are: Joe Flynn, founder and chief strategy officer of Lavante Inc., who will serve as vice chair, sponsor development Desiree Clayton, accounts payable director at Nordstrom Inna Le Guen, head of procurement center of expertise Read More…

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November 19th, 2013

Lavante Inc. Taps Alan Park as SVP Sales

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Former Executive from Trimble, Openwave and PINC Solutions brings SaaS enterprise expertise to the leader in cloud-based supplier management and recovery audit solutions SAN JOSE, CA – November 19, 2013 – Lavante, the leading provider of cloud-based supplier information management (SIM) and audit recovery software for Fortune 1000 companies, announced today that Alan Park has Read More…

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September 10th, 2013

Lavante Inc. Announces VP Product Management, Derek Anderson, SaaS Executive from Skire, WorkplaceIQ, Redwood Systems

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SAN JOSE, CA – September 10, 2013 – Lavante, the leading provider of cloud-based supplier information management (SIM) and audit recovery software for Fortune 1000 companies, announced today that Derek Anderson has joined as VP Product Management.  With more than 20 years of experience leading technology companies through growth initiatives, Anderson will lead product strategy, Read More…

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