Frequently Asked Questions

Recovery Audit | Contract Compliance

 


 

What is Recovery Audit?

recovery audit is the practice of reviewing source-to-pay transactions and the related supporting data and processes to identify and recover overpayments, under-deductions and other erroneous payments to suppliers.

What are the Types of Recovery Audit?

There are two primary types of recovery audit: an accounts payable recovery audit and a retail merchandise recovery audit.

  1. What is an Accounts Payable Recovery Audit? An accounts payable (AP) recovery audit is the practice of analyzing AP transactions to identify and recover profit that has been lost in the source-to-pay (S2P) cycle due to overpayments, under-deductions, missed discounts and other errors. It’s considered a best practice by the world’s leading companies. Learn more about the PRGX AP Recovery Audit here.
  2. What is a Retail Merchandise Recovery Audit? A retail merchandise recovery audit is the practice of analyzing retail merchandise transactions to identify and recover profit that has been lost due to erroneous pricing and promotions, missed discounts, under-deductions and other vendor funding miscalculations. As the name suggests, retail merchandise recovery audits are specific to the retail industry. Learn more about the PRGX Retail Merchandise Recovery Audit here.

Who Needs a Recovery Audit?

Almost all transaction-intense organizations should consider a recovery audit. The complexities of the supply chain, as well as a global supplier base, varying contract terms, siloed functions and fragmented systems, make it difficult to ensure that the costs and terms negotiated up front are accurately reflected in the back-end payment process.

What Industries are Recovery Audits Good for?

Recovery audits are becoming a best practice in more and more industries, including retailbankingconsumer packaged goodsinsurancemanufacturingtelecommunicationsmedia and entertainmentoil and gaspharmaceuticals and utilities.

Why Should You Do a Recovery Audit?

The primary reason to conduct a recovery audit is to recoup lost profit. In even the best-designed source-to-pay process, as much as 5-10% of value gets lost. Additionally, the PRGX Recovery Audit will also uncover the issues in your processes that caused the errors in the first place, helping you reduce the risk of future financial loss.

What Are the Benefits of Recovery Audit?

There are many benefits of conducting a recovery audit:

  • Identify where and why profit leakage is occurring.
  • Reduce financial and operational risk.
  • Recover past overpayments and improve cash flow.
  • Reduce operating expenses going forward.
  • Reduce supplier complacency and improve compliance.

What Are the Stages in a Recovery Audit?

The PRGX Recovery Audit process involves six steps:

  1. Pre-audit planning: This is a kick-off meeting to confirm audit goals, scope and key performance indicators and discuss data acquisition.
  2. Data acquisition: In this phase, we’ll establish protocol and sFTP for secure data transfer and obtain remote, read-only access to relevant systems.
  3. Discovery and plan development: PRGX will meet with key leadership and contacts to gain insight and understanding regarding funds negotiated, sensitive suppliers and more.
  4. Audit execution: Our audit team will execute data reviews, validate potential claims and identify root causes, document proof and enter into the claims management system.
  5. Validation and recovery: At this time, our team will share sample claims and review with you, present claims to your suppliers, and recover funds.
  6. Reporting: You’ll receive ongoing feedback with regular updates to monitor audit progress plus 24/7 web-based insights.

How Much Does a Recovery Audit Cost?

In many cases, PRGX Recovery Audits can be designed to be self-funding, or contingency-based, which means the cost you pay is a percentage of your total cash recoveries. If no cash is recovered, no payment is owed.

How Long Does a Recovery Audit Take?

PRGX Recovery Audit typically takes five months from the kick-off meeting through to final recovery of funds.

How Much of My Time Will a Recovery Audit Take?

When you partner with PRGX, your time commitment will be minimal. Thanks to our highly experienced auditors and heavy investment in technology, we’ve reduced the amount of client involvement down to just 1-2 hours per week.

What is an Accelerated Recovery Audit?

An accelerated recovery audit is one in which the transactions are being audited as close to real-time as possible – within days of the transaction versus months (or even years!) after. By catching errors as they happen, accelerated audits help you reduce your financial risk.

Who Performs a Recovery Audit?

PRGX has the industry’s most experienced recovery audit professionals who oversee every audit we perform.

How Do I Choose a Recovery Audit Provider?

There are many factors to consider when choosing your recovery audit provider:

  • Expertise and experience – PRGX has been the industry leader in these types of recovery audit for more than 50 years.
  • Global capabilities – PRGX is truly global, with local staff who know the customs, currencies and languages.
  • Innovative technology – PRGX has proprietary, purpose-built technology that enables faster, more effective audits.
  • Data privacy and security – While other providers outsource this important function, PRGX has fully certified data privacy and security protocols managed in-house.

How Often Do I Need to Do a Recovery Audit?

The optimal frequency of conducting recovery audits varies based on your needs. In addition to routine annual audits, it’s recommended to conduct a recovery audit when your organization is undergoing changes – new processes, new technology, an acquisition or merger, system upgrade or personnel shifts – as well as when your data isn’t consistent or if you have internal systems that do not fully integrate.

How Do I Prepare for a Recovery Audit?

Your PRGX audit team will walk you through the process, but in general client preparation for a recovery audit involves identifying stakeholders and achieving their buy-in, examining your internal processes and determining the scope of work, and gathering the necessary documents.

How Effective are Recovery Audits?

PRGX Recovery Audits are a highly effective way to recover lost profit and boost your bottom line. We typically recover $1M for every $1B in spend.

What Types of Errors Does a Recovery Audit Typically Find?

Even with the most sophisticated ERP systems, errors can still occur. Common mistakes that result in lost profit include:

  • Missed discounts
  • Overpayments
  • Duplicate payments
  • Under-deductions
  • Promotional pricing errors

What Causes the Errors Found in a Recovery Audit?

There are many things that can result in source-to-pay errors, including:

    • Highly complex procurement process
    • High transaction volume
    • Siloed business functions
    • Organizational changes
    • Supplier changes
    • Personnel turnover
    • Incomplete, complex or conflicting invoicing instructions
    • Varying locations, platforms and processes
    • Human error

     


     

    Contract Compliance

    What is Contract Compliance?

    Contract compliance is a type of financial audit that examines the terms, conditions and intent of supplier agreements (contracts) to ensure that what you negotiated is what you actually received. Learn more about the PRGX Contract Compliance Audit here.

    Why Do I Need a Contract Compliance Audit?

    Organizations spend a significant amount of time negotiating supplier agreements based on a shared vision of how those agreements will be implemented. However, over time, system upgrades, personnel turnover and other factors can affect how that agreement is actually implemented – costing you money in the process.

    Who Needs a Contract Compliance Audit?

    Any organization that contracts with external suppliers would benefit from a contract compliance audit. The complexities of the supply chain as well as a global supplier base, varying contract terms, siloed functions and fragmented systems make it difficult to ensure that the costs and terms negotiated up front are what you actually receive.

    What Industries are Contract Compliance Audits Good for?

    Contract compliance audits are a highly beneficial practice in just about every industry, including retailbankingconsumer packaged goodsinsurancemanufacturingtelecommunicationsmedia and entertainmentoil and gaspharmaceuticals and utilities.

    Why Should You Do a Contract Compliance Audit?

    The primary reason to conduct a contract compliance audit is to ensure that the value you negotiated into your supplier contracts is what you actually receive. Additionally, the PRGX Contract Compliance Audit will uncover the issues in your processes that caused the errors in the first place, helping you reduce the risk of future financial loss.

    What are the Benefits of Contract Compliance?

    There are many benefits of conducting a contract compliance audit:

    • Assess and improve supplier compliance.
    • Reduce financial and operational risk.
    • Recover past overcharges and improve cash flow.
    • Reduce operating expenses going forward.
    • Improve contract structure and language to eliminate ambiguity.

     

    How Long Does a Contract Compliance Audit Take?

    PRGX Contract Compliance Audit typically takes five months from the kick-off meeting through to final recovery of funds.

    How Much of My Time Will a Contract Compliance Audit Take?

    When you partner with PRGX, your time commitment will be minimal. Thanks to our highly experienced auditors and heavy investment in technology, we’ve reduced the amount of client involvement down to just 1-2 hours per week.

    What is an Accelerated Audit?

    An accelerated audit is one in which the transactions are being audited as close to real-time as possible – within days of the transaction versus months (or even years!) after. By catching errors as they happen, accelerated audits help you reduce your financial risk.

    How Much Does a Contract Compliance Audit Cost?

    While the cost of a contract compliance audit varies based on project size and scope, in many cases PRGX Contract Compliance Audits can be designed to be self-funding. The amount of money we recover generally exceeds the cost, resulting in a net positive for our clients.

    Who Performs a Contract Compliance Audit?

    PRGX Contract Compliance Audits are performed by the industry’s most experienced auditors.

    How Do I Choose a Contract Compliance Audit Provider?

    There are many factors to consider when choosing your contract compliance audit provider:

    • Expertise and experience – PRGX has been the industry leader in these types of recovery audit for more than 50 years.
    • Global capabilities– PRGX is truly global, with local staff who know the customs, currencies and languages.
    • Innovative technology– PRGX has proprietary, purpose-built technology that enables faster, more effective audits.
    • Data privacy and security – While other providers outsource this important function, PRGX has fully certified data privacy and security protocols managed in-house.

    What are the Stages in Contract Compliance?

    PRGX’s proven Contract Compliance process is broken down into four phases:

    1. Prepare: This initial stage is designed to set the program foundation and confirm the charter, educate and align stakeholders, assess and qualify, and design the program plan.
    2. Prep and Plan: During the next phase, PRGX will obtain a work order release, acquire your data, finalize the execution plan, engage your suppliers and acquire their data, select samples and perform pretesting.
    3. Execute: The active audit portion of our process involves testing, interviews and observation, resolving impediments and clarifying intent, preliminary conclusions and solicitation of response.
    4. Resolve: At the completion of the audit execution, PRGX will present issues to you for approval, release a final audit report, negotiate and resolve all approved issues, and educate stakeholders on the process and outcomes.

    What Types of Contracts Are Audited in Contract Compliance?

    PRGX will review your supplier contracts with you to determine where your greatest value will be found, assessing over 25 different risk attributes like spend amount, complexity, past issues, and supplier strategic importance.

    How Do I Prepare for a Contract Compliance Audit?

    Your PRGX audit team will walk you through the process, but in general client preparation involves identifying stakeholders and achieving their buy-in, examining your internal processes and determining the scope of work, and gathering the necessary documents.

    How Effective are Contract Compliance Audits?

    PRGX Contract Compliance Audits are an extremely effective way to recover lost profit. Our clients typically get back up to 5% of their spend with a supplier.

    What Types of Errors Does Contract Compliance Typically Find?

    Even with the most sophisticated ERP systems, errors can still occur. Common mistakes that result in lost profit include:

    • Missed discounts
    • Overpayments
    • Duplicate payments
    • Under-deductions
    • Promotional pricing errors

    What Causes the Errors Found in a Contract Compliance Audit?

    There are many things that can result in compliance errors, including:

    • Ambiguous contract terms
    • Differing interpretations of contract terms
    • System and control limitations
    • Incongruent or overlapping systems
    • Uncontracted activities
    • Supplier self-reporting
    • Highly complex procurement process
    • Complex supply chains
    • Organizational changes
    • Supplier changes
    • Personnel turnover
    • Human error
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