In this article, Ray Dorney from Rockford Associates Limited will show you the top 3 reasons why audit recovery software is not a complete solution
In our 20 years of delivering nearly 1000 recovery audits, we have collected and analyzed vast amounts of AP transaction and expense data from clients who do and do not use forensic audit software.
Companies that have invested in forensic audit software tend to buy with the belief that it will find any overpayments and make the work of the accounts payable team easier. The truth is that this recovery software is not a complete solution. Here’s why:
1. No real difference between organizations that use and do not use software
Many clients use forensic audit software as part of their accounts payable processes believing it will eliminate overpayments.
Data from our Findings and Recommendations reports comparing organizations that use and don’t use software confirms that this simply isn’t true. As you can see from the image below, there is no difference.
2. It’s not a cost-effective solution
When looking to recover money, there are really only three choices.
- Do it yourself.
- Do this with the help of forensic audit software.
- Hire an independent third party to do this for you.
Most organizations have the skills within their AP team and their existing basic accounting software actually has duplicate checking capabilities. So why don’t they do it themselves? Time. Carrying out these checks takes a lot of time and the PA teams are already called upon. So invariably it gets deprioritized.
Some companies invest in the use of forensic audit software, but this solution does not come cheap. First, you incur the tangible costs, your upfront software expenses and the “lock-in” of ongoing annual license fees. These costs alone can be considerable. Second, there is the invisible cost of time which is often overlooked. Time spent on installations, staff training, software maintenance, day-to-day use to identify issues, validate errors, and recover overpayments later. This consumes a significant amount of production time.
The third option is to hire a specialist company to assume these cost risks in money and time. They already have their own software and their forensic auditors are trained, experienced and motivated to identify, verify and recover these overpayments, so there is a greater likelihood that they will find the money.
But they charge a commission, right? Yes, they do. However, they find money that you would never have found or that they don’t have the internal resources to find because “flexible on-demand staffing” is usually not available in an already overburdened accounts payable environment. . This is money you may never get back. Cashback on the bottom line.
3. This is not a full verification service
It is perhaps the “best kept secret” in the industry that whether or not you use forensic audit software, it will never negate the need for an independent and unbiased debt recovery audit. accounts payable, as it does not cover all potential overpayments.
As you can see from the table below, even if forensic audit software supports a preventative overpayment strategy, it will never truly capture all possible overpayments.
I’m not saying that using forensic audit software is a bad idea for finding overpayments. In fact, we use our bespoke data mining software (Pathfinder) on all of our audits. What I am saying is that it is always worth exploring the true cost of using forensic audit software before and after engagement.
Consider the initial outlay, ongoing investments, loss of productive employee time, and always factor in the time needed to track report actions. This requires the software and process involved to fetch a considerable amount of money to support itself, let alone produce a return.
Companies can do this in-house using their own accounting software, but they still need the time and resources to process the reports, which also won’t include unknown and unexpected errors. The smart solution is to hire a specialist company like Rockford, motivated to find funds that probably haven’t been found. In our 20 years of providing independent AP audits, we have always provided cash returns. Plus, we provide positive assurance and peace of mind that your AP systems and processes are running smoothly.
If you would like to hire an independent AP audit specialist please contact me as I would be happy to help.
To learn more and how you would benefit from an audit by Rockford Associates, or if you would like to see more case studies of how we have helped other organizations, please see our contact details below.