recovery audit services

Recovery Audit ServicesPost-payment audit to recover excess payment from suppliers – through spend analytics and a continuous process improvement to eliminate sources of leakage

Gianni GiacomelliSenior Vice President, Genpact

Subhashis Nath Vice President, Genpact

PROCESS • ANALYTICS • TECHNOLOGY 2© 2014 Copyright Genpact. All Rights Reserved.

A Global Business Process Services Leader: Process Transformation and Outsourcing, Analytics, Technology

We help leaders of some of the largest enterprises transform and run their processes and operations, including the very complex and industry-specific

What we do

Unbiased, agile combination of process science, related technology and analytics limits upfront costs and enhances future adaptability

Right critical mass:

• we are large (64,000+ global staff) but our solutions appropriately flexible

• our top management is directly involved in our client partnerships

How we do it

Our impact

We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globally effective and connected…

…by enabling tighter management of costs, risks, regulations, and supporting growth

The results: US$22B* of impact for 800+ global clients


THE CHALLENGE


Companies face multiple challenges related to supplier contracts, making a compelling case for recovery audit

Challenges related to contracts Compelling case for recovery audit

• For every $100 million, a 0.1% error margin translates into $100,000 in recovery opportunity

• Recovered overpayments are literally found money and add directly to a company’s bottom line

• Delay accentuates the problem– The longer the wait, the more difficult it is to identify, validate, and retrieve them

• Excess charges levied by vendors due to undue unit rates

• Rate/contract amendments not considered

• Duplicate payments due to multiple invoices

• Duplicate charges across consecutive/future invoices

• Billing of services not used/delivery mismatches

• Billing for services not contracted

• Inadequate volume discount

• Overcharging of VAT


Undue payments to suppliers is a significant issue – up to 0.1% of revenue could be recovered

Companies are unable to address the root causes leading to repeated undue payments to their suppliers

Inability to identify root causes

Lack of quality data

Inconsistent and incomplete data for a large supplier base and huge transaction volumes makes audit exercise lengthy and difficult

Limited incentive to improve processes

Traditional external vendors have limited incentive to help improve processes and prevent future errors

Capacity constraints

Internal and local teams are often unable to invest enough time to solve systemic process issues leading to repeated errors in payments, year-on-year

Late recovery is suboptimal

Traditional audits may not be completed until 18 to 24 months post transaction leading to lost documentation and delayed cash flow


Challenges contributing to recovery vary by industry

• Purchases at different frequencies and volumes

• Frequent M&A

• As a result vendor master data and contracts tend to have overlapping entity relationships

Manufacturing and CPG

• Managing a portfolio of 30,000-60,000 SKUs creates a high volume of purchase-to-pay transactions

• Complex pricing arrangements

RetailEXAMPLE


Up to 12-17% of supplier payment value is ‘leaked’ in an average manufacturing company, of which ~80% is recoverable

% ‘recoverable’leakage Business impact

80-85% Operating metrics• Decrease in working

capital by up to 3-5%• Increase in cash flow

by 2-3%• Bottom line

improvement by up to 0.1-0.2% of revenues

Process level metrics• 10-15% improvement

in payment process integrity

• 60-70% transaction level compliance assured

• 15-20% increase in best price efficiency

~80%

~70%

~90%

~80%

5-7%

4-5%

1.5-2%

1-2%

0.5-1%

Top leakage points

Data errors and omission

Unauthorized payments

Overpayment

Duplicate Payment

Unusual purchasing behavior

1 2 -1 7 %

12-17%~ 8 0 %

~80%

% value ‘leaked’

TYPICAL

Source: Genpact experience


THE SOLUTIONS


A step by step recovery audit approach

A B C D

Process diagnostics

Process transformation achieved through application of Lean and Six Sigma, and a scientific process management framework

Audit methodology comprises:

• Data collection

• Audit analytics

• Substantive testing

• Report and recommend

Identify cash leakage points through:

• Quantitative diagnostics

• Qualitative diagnostics

• Recover outstanding claims

• Reports and dashboards

Audit RecoveryProcess

transformation

Comprehensive area in scopeAccounts payable, procurement and supply chain invoices, contract services, indirect spend

and freight, trade promotion funds and pricing, taxes, utilities and telecom


Process diagnostics

A

What can be achieved

• Identify key levers for improvement (incorrect invoice handling, payment terms not compliant with contract, sub optimal freight routing, missed promotional pricing, etc.) contributing to a high cash leakage by process

• Road map for improved processes (e.g. electronic invoicing) and compliance (e.g. contract amendments for consistency)

• Understand dependencies between various functions, businesses and regions

Delivery approach

• Experienced, trained resources deputed on-site for understanding processes and existing gaps

• Specialist offshore resources to analyze the past audit results/process data and to assess opportunity size

• Lean six sigma based solution development to generate actionable recommendations

Ke

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Sample deliverables

ILLUSTRATIVE


Audit

B


• 100% audit of in-scope areas

• Reduced recovery year-on-year by up to 15-20% through improved processes

• Feedback loop into continuous process transformation

• Improving internal control systems

Delivery approach

• Dedicated supplier recovery audit practice available for global deployment

• Audit payments on a historical or real-time basis to recover incorrect payments using industry standard tools e.g. Oversight

• Collaborative approach with client and their suppliers facilitating claim recovery

• Provide formal reporting to client and feed root causes into continuous process improvement

Sample deliverables

Da

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is

ILLUSTRATIVE


Recovery

C


• An efficient and effective recovery process leading to 80- 90% recovery/adjustments within a period of 3 months

• Identification of non-compliant suppliers to inform supplier scorecards

• Satisfied supplier network through effective complaint management

Delivery approach

• Dedicated calling team with multilingual capabilities, right staffing at the right window in a near shore/offshore model based on client requirements

• Secure access to information about outstanding claims by supplier

• Accurately connect with identified contact at best time/method of approach in agreement with the client and its suppliers

ILLUSTRATIVE


Process transformation

D


• Eliminate root cause of cash leakage resulting in efficient and effective supplier payment and related upstream processes

• Reduction in year-on-year post audit recovery by up to 15-20%

• Optimized supplier network integration throughout the S2P lifecycle

Delivery approach

• Onshore activities− Due diligence on client requirements, existing processes

and transformational to-be state− Implement technology customized to client requirements− Execute process improvements

• Globally delivered activities− Six sigma/ process experts working on identifying

bottlenecks− Develop comprehensive blueprints for process and

transactional excellence− Continuous process monitoring for adherence to accepted

operational metrics

Key performance measures

Effectiveness of IA recovery

86%47.2%

Genpact Best In Class Median

4.2MM1.2MM

2% 12%

Efficiency

Claim

denials

ILLUSTRATIVE


CONTACT GENPACT TO EXPLORE THE “ART OF THE POSSIBLE”


About Genpact

Genpact Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients.

Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability.

We have global critical mass – 62,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally.

Our history is unique – behind our single-minded passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 15 years.

For more information, visit www.genpact.com. Follow Genpact on Twitter, Facebook, and LinkedIn.

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Gianni.giacomelli[at]genpact.com

Subhashis.nath[at]axisindia.co.in

www.genpact.com/home/solutions/finance-accounting/recovery-audit-services

Thank You

http://www.genpact.com/home/solutions/finance-accounting/recovery-audit-services

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