Accounting Metrics
Vendor opencredit benchmarking from corporate America .
Every industry has its fair share of reports , reviews data points , and sound bites. The Profit Recovery profession is no different . In the last few years we have performed quite a bit of analytics and reporting to uncovered some compelling data about recovering unapplied credits from your vendors and suppliers.
From a survey of over 100 clients and prospects we have discovered that most traditional recovery providers sample only the top 5-20% of your supplier population when auditing vendor -side credits? Our survey elaborates (based on feed back from Accounts Payable professionals) that without the aid of a two-way communiction compliance engine (Lavante is the only firm with such an application .) traditional statement audit reviews, whether they are done by an outside firms or by internal efforts simply cannot support thorough supplier penetration with manual methods and cap out at 20%.
Lavante supplier open credit recovery benchmarking demonstrates that 61% of vendor open credit opportunity resides in the lower 80% of your vendor' accounting files. In other words , traditional recovery audit methods, will find , at most, 39% of the open credits due your organization .
An additionally fact you may not be aware of is that 37% of supplier -side claims come from product returns. The return category is by far the largest we are tracking . This has huge implications not only to the existing process you have for returns transactions, but also on where your profit recovery audit should focus. In contrast, we’ve found that only 9% of supplier -side claims are the result of duplicate payments. Keep in mind that hese results vary from industry to industry .
Additional results indicate that the average claim amount from a supplier credit recovery review is $817. (with a broad range, depending on the industry, of about $400-$1200) Additionally, the actual recovery potential for supplier side credit recovery is $600,000 -$900,000 per $1Billion in addressable spend volume. Although Lavante is the only recovery provider to project recoveries below the typical industry benchmark ($1M per $1B in spend) we feel confident that this carefully calculated metric passes both the scientific test and a gut test as well. When we approach new prospects and we explain that depending on their industry they stand to recovery within this range that data is always well received based on what they have actually seen from other firms and not what they have been promised.
Lavante argues this issue of identifying and recouping open credits can successfully be addressed if your organization implements a strict supplier information management, SIM policy. This policy should outline the exact process and steps that your organization follows to acquire, handle and manage information and documentation specific to each of your suppliers.
Based on our discoveries , we have also determined that for every month you do not perform an in depth automated vendor credit review you risk losing $63,000 per billion dollars of spend with no chance of recovering it. While $63,000 may not be a huge amount for you, if you spend multiple billions of dollars, and delay just a quarter’s time, that $63,000 figure becomes a large sum of money.
If you have any more questions about our benchmarking survey please join the conversation at Lavante.com…