Even though most organisations have implemented robust accounting and payment processing systems, errors still exist. In today’s world it is common for organisations to operate multiple systems, ERPs, business entities and locations. This complexity brings challenges in designing processes and procedures that cover all eventualities, as well as making effective vendor communication difficult. Naturally, there is also the occurrence of human error, which is largely unavoidable.

Here are 5 reasons you should consider a recovery audit:

1. Recover Lost Money

By conducting a comprehensive recovery audit, organisations are able to recover money lost. This can be in the form of unrealised credits, identification and collection of overpayments, the recovery of cash on account, rebates, and unapplied discounts.

2. Detecting Operational Weaknesses

Over time it is common for operational gaps to develop within accounting and audit processes and procedures. During a recovery audit review all findings and root causes are recorded and analysed for trends. A large part of this process is identifying operational weaknesses and applying remedies.

3. Reducing Future Risks

Recovering lost money is important. However, it could be argued that reducing the future risk of losses is even more so. By learning from audit results is it possible to highlight the areas of future risks and improve controls to reduce or eliminate them altogether.

4. Compliance

Incorporating a recovery audit regularly into an organisations financial calendar can assist in the compliance of regulations set by authorities or internal stakeholders. It can provide evidence of an organisation’s commitment to process review and improvement.

5. Fraud

If the department of an organisation is not audited from time to time, then your business is at greater risk of fraud and financial malpractices. The recovery audit process can be essential in identifying both internal and external risk factors.

Which organisation should consider a recovery audit?

Organisations in all industries and sectors should consider an accounts payable recovery audit. However, organisations meeting the below criteria should consider it a standard best practice: Annual invoice volumes over 50,000 and/or: Annual 3rd party spend over £250m

Why consider a 3rd party for the recovery audit project?

Due to the nature of a recovery audit project, it can often be beneficial for the review to be carried out by a 3rd party organisation due to impartiality. When reviewing errors, a 3rd party will have a complete unbiased approach which leads to the best results. It is also common that internal audit or accounts payable teams simply do not have the resources, expertise, or technology to dedicate to this type of project. In many case 3rd party recovery audit firms are paid only on a contingency basis on the results of their findings. This makes it a risk-free project.