Why AP’s should learn to appreciate the benefits of a recovery audit

reconciliation statements

We’ve experienced a lot of changes in the world of accounts payable in the last eight months.

With a mix of office and remote working changing up the industry, at Westgate Moore, we wanted to explore how AP’s and finance directors view the recovery audit process, and how it currently fits into their new way of working.

And it appears that of the AP and financial experts we questioned, 92% understood that duplicate payments and overpayments were still a common occurrence within the sector.

This is even alongside the use of technology, such as internal duplicate payment checks, that is typically built into their ERP’s.

And with AP’s clearly identifying the volume of mistakes and oversights that are made daily in the process, it may be surprising to understand that 60% of those questioned had never worked with a third-party organisation to audit historical data to identify these mistakes.

These external auditors can be on hand to locate and recover overpayments made to suppliers.

They can therefore chase up funds including mispayments and overpayments which are owed to the company, yet it appears to be something that very few AP’s make the most of.

In fact, 30% of respondents weren’t aware that an audit of this type was available to them, and the remaining 10% believed the controls they had in place were robust enough to prevent any type of payment errors from occurring.

But unfortunately, from our experience, robust controls within an accounts payable function doesn’t mean that mistakes can’t still be made.

Most AP’s or finance teams don’t have the time or resource available to periodically review mispayments or overpayments, which is typically the only way this can effectively be monitored.

But, one of the striking points that came out of this study was that, even as of 2020, finance professionals are still put off by the term ‘audit’.

In fact, that may be the reason as to why 100% of people asked about the term ‘audit’ had a negative stigma surrounding the phrase.

The moment the word ‘audit’ is mentioned, feelings of dread, annoyance, nervousness, and even anxiety and worry for businesses who are ill-informed on the process can arise.

In a number of cases, businesses are often concerned about the sharing of private information with the auditor, which can prevent them from investing in the service.

From our experience though, the most common reasons and thoughts behind the recovery auditing process is that it is:

– time-consuming
– intrusive
– and resource-heavy

With all these negative views on the process, it’s no surprise that a recovery audit is on the bottom of the priority list for time-poor AP’s and finance teams.

But, these misconceptions couldn’t be further from the truth, as a recovery auditor only needs three things to establish any mispayments made:

– Historical transactional data, typically a simple report exported from ERP
– Supplier master file, another simple report taken from ERP
– Read-only access to ERP – a simple task of adding a new user to the ERP

And, in most cases, those who do agree to a recovery audit are surprised as to how little intrusion is needed to explore finances and complete the process, with 75% of people questioned in the survey agreeing.

But there is one way we, here at Westgate Moore, believe the recovery audit process can really improve its reputation; with a simple name change.

With the main aim of ‘recovery auditing’ surrounding the recovery of lost revenue, we believe the next step to remove the stigma is to identify the process as ‘profit recovery’.

And with AP’s and finance directors sure to jump at the chance of recovering lost profit, there’s great scope to appeal to many a finance professional.

Along with a new name, the recent pandemic has also imposed further changes in AP operations.

In most cases, we now see recovery audits taking place remotely, with all validations being conducted through read-only access to the ERP.

And with great success too.

In fact, an example of our last profit recovery was with a business with a £1.2 billion non-pay spend over a five year period.

After just two meetings per month via video call with the client, our team were able to export the necessary data, approach each individual supplier and work towards the sum of lost revenue.

For this particular client, we were able to recover £600,000 worth of lost revenue for the business, all via remote working, with no impact on the day to day workload of the business’s AP manager.

Overall, the audit and recovery of lost revenue took just a few months, and with figures like this, it will surely make audits much more appealing to AP and finance teams, whatever the size of the business.

So, if you want to speak with a profit recovery specialist, get in touch with the team here at Westgate Moore, who would be more than happy to recover the lost revenue your business is entitled to.

Be sure to get in touch with us today on 0121 3256920 or email us at hello@westgatemoore.co.uk and a member of the team will be in touch with you shortly.