How Does It Work?
Data Acquisition – Working with your IT department to acquire key data sets that allow us to create a transactional audit trail. Specifics regarding what is needed will be shared and any questions or concerns addressed.
Due Diligence – We’ll schedule time to meet with both Supply Chain and Accounts Payable (AP) – to understand internal processes, business practices and policies – which helps answer questions. We will also answer specific questions or concerns your team may have; in an effort to help them understand our approach. This process is valuable, since it helps convey transparency and positions us to meet client expectations.
Typical needs include identifying the best approach for accessing documents needed (invoices, contracts, price changes are examples) and determining internal contacts who can provide guidance for different needs that surface during the review.
Creating an “Audit Trail” – We use data received from your IT department to recreate historical purchase activity for “data mining.” This involves verifying all data is accounted for and enables us to determine if there are issues (“missing pieces”) or clarification needed prior to our review.
Statement Solicitations provide visibility to what suppliers show as being open on account. This snapshot also provides valuable insight – often answering questions regarding items identified during our data mining process. Statements items are often a reflection of how well suppliers address or resolve variances and often lack accuracy. Regardless, the awareness of what is perceived to be open – prior to contacting suppliers – is helpful. Suppliers chosen are targeted based upon specific criteria from the data sets provided.
Data Mining is the process used to identify “items of interest” – via anomalies, patterns or fluctuations within the data. The quality of data is a significant factor that impacts the efficiency of our review. Better data translates to higher accuracy. Not all transaction activity will have supporting data, creating a separate, more involved – manual review. While many reviews focus on the electronic piece of a review, the manual transactions are typically an outstanding opportunity in terms of recovering funds – since the visibility of those transactions is significantly low.
Companies that have not transitioned a significant portion of their suppliers to EDI, face visibility obstacles. Having quality data that represents both a high percentage of invoice activity and those suppliers that represent the highest dollar volumes is an important factor to meeting accuracy expectations. Additionally, it reduces the workload associated with exceptions and positions Supply Chain to create analytics that helps buyers make better decisions and ultimately reduce costs.
Insight – Data Quality & EDI
Recovery Opportunity
The recovery opportunity is dependent upon different criteria:
- Scope – Target areas = Supplies, Purchased Services & RX
- Data quality (high) and availability – Better data & EDI
- Supplier contracts and related documents availability
- Staffing or System Change – Turnover/internal change
- Internal efforts focused on process improvement
- Past Reviews – Awareness level of issues
Claim Process
- Identify anomalies/items of interest
- Verify if credit has been received (debit, credit, or check)
- Retrieve supporting documentation (if needed)
- Present findings to supplier for review
- Receive credit or written approval to process claim
- Submit claim for processing
The claim process is driven by our team. Potential claims go through a verification process to determine whether the item in question has been reconciled internally, or by the supplier. While most suppliers do a great job identifying overpayments, others do not.
Cash receipt processes vary from supplier to supplier and many have routines that periodically review invoicing and payment accuracy – resulting in the creation of internal credit. The same may occur with clients – debits are created (even after invoice payment) – to recoup funds due.
The verification process is a valuable part of reconciling supplier activity, as it enables an understanding of supplier issues and sensitivities prior to contact. Once research is complete and the claim is documented, we reach out to the supplier and ask for assistance.
Most suppliers are receptive to helping reconcile older items if approached in a professional manner. Being fair and focusing on items of substance – and providing specifics they’ll need to research – reduces the inconvenience on their end and helps differentiate you from others.
If they agree with the findings, we ask for a credit memo – thank them for their assistance – and submit the approved (with backup documentation) to Accounts Payable for processing.