How Can A Recovery Audit Optimise Your Procurement Process?

Procurement processes are significant in any organisation as they determine how resources are acquired and managed. Ensuring efficient, compliant and cost-effective procurement processes is important for controlling costs and maximising value.

However, as needs change, processes can become outdated or ineffective over time. Conducting recovery audits is an important way for organisations to identify areas for improvement within their procurement processes.

Key Takeaways

1. A recovery audit can help identify common issues with procurement processes, like pricing errors, missed discounts, compliance gaps, duplicate payments, and tax/tariff errors. This provides insights to strengthen controls.

2. Reviewing the process breakdowns helps determine what additional controls, approvals, training, or systems are needed to improve overall compliance and controls.

3. Continuous monitoring is important, including periodic post-payment audits, supplier surveys, benchmarking, refresher training, and ongoing audit cycles.

4. Regular audits can help streamline processes, boost efficiencies, maximise savings, and justify the initial investment by ensuring optimisations deliver sustained benefits over time.

Areas for improvement in the procurement process

Some common areas a recovery audit may uncover for improvement within procurement processes include:

Pricing Errors - Auditors often find instances where suppliers were overpaid due to pricing errors on invoices or purchase orders. This could point to a need for stronger invoice validation or purchase order management controls.

Missed Discounts - Failure to take advantage of discounts for things like prompt payment or volume purchasing is a frequent finding. This may indicate a need to better communicate discount terms to buyers or track discount compliance.

Compliance Gaps - Issues like lack of contract compliance, missing approvals or failures to obtain required documentation can be exposed. Tighter process controls may be warranted.

Duplicate Payments - Double payments to suppliers due to issues like duplicate invoice processing present easy recovery opportunities. Enhanced pre-payment validation is advisable.

Tax/Tariff Errors - Incorrect application of taxes, duties or tariffs results in unnecessary overpayments that optimised processes could help avoid going forward.

Contract Management - Weak contract management enabling overbilling beyond agreed rates or failure to renegotiate expired contracts at lower prices are common audit observations.

By gaining a thorough understanding of past errors and compliance weaknesses, a recovery audit provides procurement teams valuable insights into how to strengthen internal controls, cut costs and boost operational efficiency on a go-forward basis.

Optimising the procurement process based on findings

The key questions to consider whilst reviewing the audit findings include:

1) What specific process breakdowns enabled the identified errors/overpayments?

2) Are additional approval levels, validations or controls needed to prevent recurrences?

3) How can systems/tools be leveraged more effectively to automate manual tasks?

4) What level of retraining is required to close staff knowledge/skills gaps?

5) How will compliance with policies/procedures be monitored on an ongoing basis?

6) Are new performance metrics required to incentivise cost-saving behaviours?

Answering the questions above will allow the organisation to create an optimisation plan, ensuring knowledge, controls and procedures improve. Pilot testing proposed changes is also advisable before full rollout.

Continuous monitoring & improvement

While a recovery audit provides a snapshot in time, optimisation is an ongoing effort that requires continuous monitoring and refinement. Considerations include:

? Conducting periodic post-payment audits of a sample of transactions

? Surveying key suppliers about payment experiences to identify friction points

? Benchmarking metrics like payment error rates against industry peers

? Circulating periodic compliance reminders and refresher training

? Gathering ongoing staff feedback to ensure controls remain relevant

? Regularly reassessing KPIs to ensure a focus on cost optimisation.

? Creating an ongoing continuous recovery audit programme

With the right structures in place, procurement processes can be kept dynamic to address the changing needs of the business. Regular monitoring also helps justify the initial investment in a recovery audit by ensuring optimisations deliver sustained savings and compliance over the long run.

To conclude

If your business is looking to streamline procurement functions, boost operational efficiencies, and maximise savings from existing spending, a recovery audit is highly recommended. Partnering with an experienced recovery audit firm like Audit Partnership ensures a thorough, objective, and insights-driven audit process tailored to your specific requirements.

Audit Partnership has a proven track record of delivering multi-million dollar recoveries and savings for clients across industries through customised recovery audit solutions. Our specialised audit methodology and expertise can be immensely valuable for optimising your procurement processes.