What are the best practices for Contract Compliance in a Recovery Audit?
Audit Partnership
Audit Partnership is on a mission to help our customers recover lost profits.
Recovery audits provide a valuable opportunity to thoroughly review spend and ensure all supplier agreements are being followed appropriately. Here are some key best practices for maximising contract compliance during a recovery audit process:
1. Clearly Define Contract Terms
Take the time to thoroughly review all supplier contracts and clearly document the agreed upon terms, such as pricing, discounts, allowances, and payment schedules. Ambiguous contract language can lead to disputes later on. Make sure procurement and accounts payable teams have access to the most up-to-date contracts.
2. Risk Optimisation
Take a risk-based approach to compliance to focus efforts on areas that matter most. Leverage spend data and analytics to identify categories or vendors that present the greatest financial or reputational risk of non-compliance. Prioritise contract management and audit procedures for these high-risk areas. Meanwhile, establish self-auditing requirements or scaled-back reviews for lower-risk spend to balance compliance needs with resource constraints.
3. Data-Driven Cost Reduction??
Recovery audits provide a treasure trove of compliance and spend data to identify new cost-saving opportunities. Analyse contract compliance findings for trends, such as commonly missed pricing tiers, and work with key suppliers to renegotiate terms. Also use audit results, such as adherence to minimum order quantities, to right size inventory and reduce carrying costs. With the right data in hand, recovery audits can fuel ongoing cost optimisation well after the audit concludes.
4. Proactive Monitoring Workflow
Make compliance part of your standard invoice approval process rather than an after-the-fact review. Build systems and checklists that prompt approvers to verify prices, volumes, and other key terms before releasing any payment. Automate auditing of invoices against master contracts to flag anomalies for investigation. A proactive monitoring workflow embedded directly into your processes catches more compliance issues upfront.
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5. Maintaining Good Supplier Relationships
While recovering overpayments is a key objective, it's also important to maintain strong, collaborative relationships with key suppliers. Communicate audit findings transparently and give suppliers a chance to remedy issues cooperatively. Where possible, structure audit processes and contract terms proactively to incentivise desired behaviour from suppliers rather than catching them off guard. Suppliers are more likely to remain committed partners through future negotiations if treated respectfully throughout compliance reviews.
Supplier Contract Compliance Checklist
Here is a sample checklist of important items that should be included in a vendor/supplier contract:
Why Choose Audit Partnership for Recovery Audit Services
As a leading recovery audit firm, Audit Partnership is uniquely positioned to help organisations navigate the complexities of contract compliance. With a proven track record of success and a team of industry experts, Audit Partnership offers customised solutions that empower clients to achieve their financial objectives while maintaining the highest standards of compliance and supplier
Final Thoughts
By establishing these types of best practices, organisations can maximise recovery audit value for contract compliance and cost savings while mitigating risk. Outsourcing to experienced firms, like Audit Partnership, allows companies to stay focused on their core operations while leveraging expert resources and technologies for robust compliance management. Recovery audits are most effective when compliance remains an ongoing discipline rather than a one-time event.