Profit Recovery: Overview (#48)
/In this podcast episode, we give an overview of the basic analysis tools used to review a company’s spend data and find opportunities for improvement. Key points made are:
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Health care, audit fees, and utility bills are among the best profit recovery areas to target.
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Look for opportunities where controls are weak, systems changes have recently been implemented, or where acquisitions have just been completed.
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Review accounts payable data files for clues, especially the invoice header file and invoice detail file.
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In mergers and acquisitions, cost savings are more likely when the acquiree has at least $20 million in sales.
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For a duplicate payments audit, the spend should be at least $10 million before you can expect to find significant savings.
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For analysis, summarize spend by supplier and then by expense category.
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Look for suppliers who are sole source providers; could open up for competitive bidding.
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Look for suppliers who have an increasing cost trend; could open up for competitive bidding.
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Look at the volume of transactions vs. the dollar spend; plot on a scattergraph.