Accounting Benchmarking

Vendor  credit benchmarking from the front lines .

Every industry has its fair share of reports , reviews data points , and sound bites.  The Profit Recovery  profession is the same  .   Recently  we have performed quite a bit of analytics  and reporting  to exposed some compelling information about recovering open credits from your vendors and suppliers.

From a review  of over 100 clients and prospects we have discovered that most traditional recovery providers test only the top 5-20% of your vendor population when reviewing supplier  -side credits?  Our  study  shows  (based on feed back from Accounts Payable  professionals) that without the help  of a communication compliance aplication (Lavante is the only firm with such an application .)  traditional  venodr side  audit reviews, whether they are done by an outside  firms or by internal efforts simply cannot support indepth vendor penetration with manual methods and cap out at 20%.

Our vendor open credit  recovery benchmarking demonstrates that 61% of vendor   open credit  opportunity exist  in the lower 80% of your vendor’ accounting files.  To put it another way , traditional recovery audit   methods, can only recover , 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 that was identified  .  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 numbers vary from industry to industry  .

Some other interesting metrics indicate that the medium claim amount from a vendor credit recovery review is $817.  (with a broad range, depending on the industry,  of about $400-$1200)  We have also discovered that the actual recovery potential for vendor 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 forever well received based on what they have actually seen from other firms and not what they have been promised.

Lavante argues this issue of recovering otherwise lost revenue can successfully be addressed if your company  implements a strictsupplier information management, SIM policy. This policy should outline the exact process that your organization follows to acquire, handle and manage information specific to each of your suppliers.

Based on our discoveries , we have also determined that it is important for organizations to act swiftly in addressing this accounting problem and 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…