Recovery Auditing, understand the past to help you prepare for the future.
Recovery Auditing was born in the retail industry some 40 years ago; thanks to its complex structure heavily burden with the high volume of countless transactions. Retail was a “fruitful ground” for all kinds of transaction errors. Very soon, the recovery auditing firms realized that there’s a high potential for dollar recovery associated with retail as well as grocery related companies. Their auditor teams were reviewing retail AP, purchasing processes, and data, to achieve these goals.
As expected, recovery auditing industry inevitably evolved. It had become almost obvious that these transaction errors weren’t the exclusivity of the retail industry. Any industry dealing with the high volume of both transactions and suppliers is a potential client for providers of recovery auditing services. Also, the successful recovery practice of auditor teams attracted the attention of manufacturing and other high volume companies.
Nowadays, traditional recovery auditing usually requires a timeframe of 3 to 6 months involvement each year or two. An auditing team can assist a company’s staff both onsite and remotely when required to review purchasing data and processes, which also include contract compliance errors, missed discounts, and pricing. Before the introduction of advanced technologies and complex algorithms, which improved identification of most common AP and purchasing anomalies, recovery auditing had to be performed manually.
It’s worth mentioning that results of traditional and manual AP recovery audit come in the form of hard-copy reports delivered to the company’s AP department, with an average recovery funds rate of about more than 5%. Modern recovery firms are improving this discouraging percentage, with the introduction of efficient and user-friendly online interfaces for identifying and reviewing reports.
Recovery auditing industry has a great untapped potential for any high volume company. However, for recovery auditing to reach its full potential, it’s essential for it to embrace new technologies and automatized systems. Here’s an illustrative example to emphasize this necessity. If the recovery auditing process includes only 5-20% of suppliers as a part of the company’s review, this means that more than 60% of statement credits associated with the remaining 80% will just remain untouched and undetected. To reach this 80% section, which guarantees the real success of dollars recovery process, it’s essential to overcome the challenges of traditional auditing methods. Otherwise, the mass volume of suppliers and transactions will remain to be the most challenging obstacle in this field.
Recovery Auditing Future
We had a brief history lesson about the recovery auditing industry. What can we say about its future? New technologies and fully automatized processes are the best guarantees that auditor teams can process as many suppliers-related data as they’re required to. The recovery audit industry works in a complete accordance with a simple formula. The more purchasing data you can process and more errors you can identify; the more dollars you’ll be able to recover. New technology and automatized systems are the perfect matches for this formula’s improvement.