Peeriosity Insights: Recent Research Findings Summarized insights. To view detailed research results, contact us to inquire about membership.

Accounts Payable Profit Recovery Services

Shared Services organizations around the globe have recovered millions of dollars in lost profit for their companies through formalized recovery service processes within their Accounts Payable functions.

A PeercastTM in the Peeriosity Accounts Payable research area featured a global Shared (Business) Services organization that is the leader in their industry and has suppliers in over 100 countries. Their Procure-to-Pay process is extremely mature, enabled by a global ERP, standardized process, and operated through regional centers. Activities that are repetitive and transactional-based (and being reduced through P2P process improvements) are outsourced while company employees source analytical and expert services.

While organizations may differ on what exactly recovery services entail, every Accounts Payable group should be focused on four key objectives:

  • Prevention – Proactive controls to identify fraudulently, duplicate, and overpayments before they happen
  • Recovery – Formalized process to identify and recover money owed to the company
  • Improvement – Quality methodology to identify and correct root cause defects in P2P
  • Relationships – Internal procurement and external suppliers are valuable partners

A recent Peeriosity Accounts Payable Research Area benchmarking exercise yielded some interesting results in regards to the prevention and recovery objectives. As you can see below, 45% of organizations have implemented automated proactive controls to “red flag” potential disbursements for investigation.

While less than half have implemented automated prevention controls, almost all are engaged in recovery activities:

The inference from the poll would indicate that many Accounts Payable organizations might want to consider automated prevention tools as they are investing the resources (and possibly fees) on the back-end recovery for items that could possibly have been identified prior to payment. The vast majority of recoveries tend to be related to paper-based invoices. Automated tools are particularly effective in identifying fraud, duplicates, and overpayment of paper-based invoices. The majority of Peeriosity members that benchmark the first quartile have made significant progress in moving away from paper-based (and resource-intensive) Accounts Payable processing and have implemented automated prevention tools to red-flag planned disbursements that meet certain criteria for further investigation.

Best practice Recovery Services target a number of items for possible profit recovery including:

  • Credits (majority of recoveries)
  • Pricing
  • Purchase Threshold Adjustments
  • Tolerances
  • Small Balances
  • Write-offs
  • Rebates

Additionally, many Shared Services organizations have added contract compliance services, which may be part of their recovery services or a separate service. The group discussion identified this as an opportunity area for Shared Services organizations, and those that have implemented have been very pleased with the results to date.

The discussion on sourcing the recovery component yielded some interesting comments and observations:

  • The 90/10 rule applies to recovery – 90% of recovery dollars generally come from the top 10% of suppliers by spend. A few organizations target the 10% of suppliers internally and outsource the other 90% to recovery firms.
  • The majority outsource to recovery firms and are generally pleased with the results. They do caution that certain firms are experts by geographic market and for global organizations, various firms may need to be sourced.
  • Investing in prevention tools can have a significant impact on reducing credits to recover (and fees paid).
  • Eliminating PO paper invoices will have a significant impact on the entire process cost and recoveries.
  • If using an outsourced recovery firm, maintain full oversight of the supplier communication channels (letters, e-mails, calls) to protect the supplier relationship.

The PeercastTM collaboration also discussed:

  • Recovery expectations as a percentage of company spend
  • Recovery vendors that members would recommend
  • The optimum frequency of recovery audits
  • Skill sets (internal and external) that lead to an effective Profit Recovery Service offering
  • Internal support requirements for Profit Recovery Services

How is your Shared Services organization providing Profit Recovery Services?

Who are your peers and how are you collaborating with them?

1 “PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion.  Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content.  Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member.  Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees.

Are You Eligible for Membership?
Click Here to Find Out