Recovery Audit is a discovery process, exploring whether omissions or errors have adversely affected the finances of your organisation.
Whilst our Accounts Payable & Receivable Programmes give assurance that transactions have been processed correctly through your financial systems, our Contract Financial Audits undertake deep-dives below the surface of those transactions.
Why Deep-Dive?
The financial components of contracts vary in complexity. At its simplest, a contract may have basic pricing and straightforward payment terms for a given period. At the other extreme, it may have complicated pricing structures, multiple charging rates, tiering elements, penalties, discounts, rebates, volume or value thresholds and other financial clauses.
Your ability to verify the accuracy of the invoicing of each of those components will likely vary depending on time, access to suitable data, your capabilities for analysis and manipulation of that data and the knowledge levels of your personnel.
Taking your supply chain processes and vendor base, for example, the contract arrangements frequently include provisions for periodic management information or line-level billing schedules to support supplier invoices. Often however, the analysis, or even the receipt of such data can become inconsistent over time for several possible reasons:
- Change: Be it system, personnel or process, change for either party creates risk. For example, a new system may not present the same level of information as previously offered, failing to offer all that is required. New personnel may also inadvertently omit data submitted or misinterpret data received. Details of certain clauses may not be recorded centrally, such as rebate terms, and a comprehensive knowledge of contractual conditions may become lost.
- Distraction: Sometimes unrelated – often unexpected – complications, opportunities and competing priorities arise. These may adversely impact the time available to analyse, or pursue if missing, the details behind charges and confirm if they are in line with expectations.
- Complacency: Once a relationship has developed and forecast spend levels have been established, the level of scrutiny may simply wane.
The risk of single or minor, accepted levels of error may be viewed as immaterial when considering an isolated or limited number of transactions. However, un-detected, frequent or systematic overcharges over time can amount to sums your business will not wish to ignore.
How do Aveiroe Deep-Dive?
“The team looked deeper into our financial and contractual records than previous audit companies we had appointed, engaging professionally and sensitively, delivering significant monies to the bottom line in a short space of time.”
There is no one-size-fits-all template to contract auditing. Our approach will often evolve as we progress through the audit and build a clear picture from the data collected. We listen, we assess, and we adapt to ensure we explore all opportunities.
Our Deep-Dives provide verification of the various components and calculations to your supplier invoicing and accounting to ensure they mirror the contractual agreements, including any additions or amendments which may have been implemented over the life of the relationship.
Our focus is tailored for each contract/relationship, but can include the in-depth analysis of:
- Pricing
- Rate Cards
- Timesheets/Labour Costs
- Booking Schedules
- Rebates
- Gain Share
- Bulk-buy or Volume Discounts
- Commissions/Royalties
The review for supply chain audits typically involves the collation and analysis of data such as transaction data, contract documentation, backing schedules and management reports held either within your business or by your suppliers. Our experience in conducting tens of thousands of annual contract reviews means we know what questions to ask to obtain the required information quickly and we understand what data should be readily available.
We do not make blanket demands of suppliers; once we know what we need to perform the work, we engage and work with your suppliers as necessary to get to a comprehensive and accurate view of the period under assessment and to recover monies owed back to your business.
At the same time, we continually consider any potential risks and downsides in our findings.
We understand the importance of maintaining positive and collaborative relationships with suppliers and we guarantee that all our dealings with the supplier base will be respectful, honest and conducted with integrity.
Beyond the Recoveries
A key element to all our audits is our knowledge-sharing programme Faculty Services. In addition to recovering any monies due to your business, where we identify areas of process or contractual weakness, we make recommendations to improve and strengthen those areas going forward to help prevent future, similar lost profits.
About The Authors
Jo Shanta and Gary Fulton have, between them, accumulated c40 years of contract auditing experience. They bring their respective backgrounds in the Legal and Accounting disciplines to their careers in this highly specialised area and have had the privilege of working with a wide variety of organisations, from some of the world’s largest companies to many smaller and medium-sized enterprises.
As Audit Operations Partners with Aveiroe Europe, their expertise has been built up across many different categories of business activity within the clients they’ve served and spans multiple sectors. The high regard in which they, and our Contract Audit Team generally, are held by clients is evidenced by the referrals and testimonials given across that time.