The last thing any business wants is money left on the table. In accounts payable departments, that lost money is more common than you might think. Duplicate payment errors lead to overpaying your vendors, and if you don't verify and follow up on those transactions, those errors can become incredibly costly.
The best way to get that money back is with a recovery audit that digs into your records and flags duplicate payment errors. Accounts payable recovery audits are vital to the health of any organization — and no matter how accurate your department is, you'll find that there's plenty of money to be recovered.
A typical accounts payable recovery audit has two major facets:
Despite the benefits, however, many organizations hesitate to run accounts payable audits because traditional recovery audits require significant manpower, expense and manual data sorting. But there is an alternative: automated recovery audits can speed up the process significantly and enable your team to focus on the vendor communication, rather than error discovery.
Traditional recovery audits require teams of accountants to sift manually through your ERP system and pull all potential duplicates they find. It's not only tedious and slow, it's also ineffective: human error can lead to missed duplicates or false positives, especially if the team isn't highly experienced in what to look for. Only after errors have been identified can your team start chasing down vendors — but even then, your team might struggle to pull together the vast amount of reporting data required to support your case for a refund.
Automated accounts payable recovery audits change all that. By extracting data directly from your ERP system and running it through advanced algorithms in a software program, you can sit back and watch as duplicates are discovered for you. This can take the identification process down from weeks to a couple of hours, with higher accuracy than human teams. You'll also have access to preconfigured reporting data, so your team can focus on recovering funds worry-free.
Benefits of an automated audit include:
Of course, not all recovery audit softwares are built equal. Some have a tendency to miss errors or flag false positives. Check out this whitepaper for more information on how to choose the right tool for your needs.
The first step when running an A/P recovery audit is to identify duplicate payments, ideally from the past three years of payment data. An automated tool will dig these out for you once you upload your data. For instance, Technology Insight's DataShark scours your data and flags duplicate payment errors, sorting them into categories based on the likelihood that they're a false positive. This enables your team to focus energy on the errors most likely to give the highest reward. Powerful tools like DataShark will also run root cause analysis, like naming conventions across vendors, to help you identify the source of common duplicate payment errors and prevent them in the future.
With the data sorted, you can use the automated software's reporting functionality to gather the results of the accounts payable recovery audit. If your team is in charge of the audit, you can then begin the communication stage; otherwise, experts at companies like Technology Insight can handle that for you.
First, reach out to vendors with a letter or email and request a statement for your account. Compare that statement to your own records and note any discrepancies. Then, present your evidence for a duplicate payment to the vendor and request a refund or account credit. You can also use the opportunity to determine whether you have unrecovered credit values like cash on your account or open credit notes.
From there, you can begin to iterate on on the process. If you're working hand in hand with experts, they can help you to improve your training or make recommendations to reduce the overall frequency of duplicate payments. For instance, if the same vendors continually crop up on accounts payable recovery audits, you should keep a closer eye on any statements and invoices from those vendors. If you discover credit return notes, it may indicate that your team isn't following up properly to receive credit paperwork.
Automated accounts payable recovery audits are an incredibly powerful process, and a well-run audit will pay for itself quickly. They're also essential for all businesses. In fact, in our 30 years of experience at Technology Insight, we've never seen a single company that's error-free.
Karl Andersson has devoted his career to helping organizations improve their business processes. For 15 years, he has worked with multitudes of Fortune 500+ companies as the CEO of Technology Insight. Before this, he spent 10 years working in the audit and consulting sectors, which included large international projects in both Europe and Asia. Karl brings a combination of industry expertise and real-world experience. The diversity of his clients has allowed him to understand a variety of industries, and the unique challenges that each of them face.