Large amounts of data are produced every minute across the corporate world. In any individual corporate, very large volumes of data – financial as well as non-financial –are being generated, validated and stored. Every organisation spends disproportionate amount of time and effort to ensure that the processes in place are robust and proactive in ensuring right payments and correct recoveries.
Despite best efforts, it is proven worldwide that the duplicate / excess payments and under recovery / lower invoicing are prevalent across organisations. It is recorded that the duplicate/excess payments range between 0.1% to 0.2% of total expenditure i.e., USD 1 to 2 Million lost on a payment base of USD 1 billion. While individual amounts or instances may be small or insignificant at times, the cumulative impact is sizeable.
Our experience shows that two of the most simple processes – Accounts Payable (AP) and Accounts Receivable (AR) – are prone to duplicate or overpayments as well as under charging or short recoveries.
It is proven that these two processes, despite the existence of state of art ERP and control mechanism are still vulnerable to revenue leakages and 70% of these errors are normally not identified with the system built controls.
Some typical scenarios where these leakages commonly occur are –
Accounts Payable – Payment for the same goods and or services more than once or in excess of what should actually be paid; payment not in line with the contract; non-utilisation of payment term discounts etc.,
Accounts Receivable – Raising invoices for lower prices, offering discounts in excess of the norms, customer claims being over paid, to name a few cases of revenue leakages in the AR Process.
Vendor and Customer Masters – Duplicate vendor masters which bypass inbuilt system controls on duplicates, old vendor and customer masters who are not deactivated on time are a few common areas of leakages. The exposure on account of the above increases during the phase of Mergers and Acquisitions, System Migration, System Integrations, System Upgrades, Shift from Decentralized to Shared Services environment, Shift from hard copy to image based processing, Multiple stand alone systems and database for processing transactions, Too many process exceptions, to name a few.
We employ state of the art tools combined with the experience of handling of large data volumes. We dip into our library of past duplicate payment history of various clients to create and simulate possible scenarios. These scenarios are converted to rules and algorithms. We assist the finance and IT teams to embed these algorithms in the ERP to detect and capture duplicate payments before they are released to the vendor.
We employ teams on site to track payments and help in the detection of possible duplicate or over payments. This rigour helps in early detection of duplicate payments and brings about a reduction of such instances over a period of time
Traditionally high amount of emphasis has been laid on AP data to perform recovery audit. It has been the general norm to identify a small percentage of the vendor population to perform the statement review calling for the statement from the vendors. It has been generally understood that the effort involved in this process is high and the recovery arising from this exercise is not commensurate with the effort.
We have developed a robust statement review process covering the complete base of vendors.
With this deep dive process which commences with the vendor contracts to analyzing the invoices and culminating with the vendor statement, we have been able to realize and recover moneys that were hitherto not considered as due and hence not recovered. Our analytics team relies on the latest tools and techniques as well as the rich experience in this area, to uncover as well as recover moneys from these reviews. Some classical scenarios which are identified and moneys recovered are missed credits for material returned, price variance credits, unclaimed discounts and rebates, unprocessed credit memos and payments for cancelled invoice.
The traditional accounting relies on revenue recognition and contains country specific laws on the same. The reliance here is more on the time period in which the invoice is raised and revenues recognised in the books of accounts. Now corporates are insisting on the need to ensure that the revenues recognized are indeed the right revenues. This gives rise to the need of CFOs to assure the board and other stakeholders on the revenues that are booked in the statement of accounts.
The revenue assurance process is a great tool in the hands of the CFO to satisfy the internal as well as external stakeholders about the revenues recorded in the books of accounts.
We rely on extensive analytics to review the invoices, price changes, claimed raised by customers and various other parameters which impact the revenue. We undertake review of discount circulars for identifying under invoicing issues. Claims raised by customers are subjected to analysis to identify and eliminate cases of excess claims.