Profit Recovery: Vendor Relationship Management (#60)

In this podcast episode, we discuss how an examination of the relations between a company and its vendors can uncover profit recovery opportunities. Key points made are:

  • Conflicts of interest between a company and its vendors can cause major expense increases.

  • Companies tend to look for fraud internally first, which means that vendor investigations are delayed or never happen at all.

  • A common profit recovery scenario is when a company makes duplicate payments to a vendor, which has not sent them back. This could be a vendor error, or it could be fraud.

  • It is difficult to spotlight cozy relations between company staff and vendors, but you can use the Internet to uncover some of these relationships.

  • Need strong procurement practices to examine vendor relationships on an ongoing basis.

  • A conflict of interest may be OK, as long as the company is getting a good deal; verify whether this is the case with benchmarking, or use a full audit to search for anomalies.

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Cost Management
Purchasing Guidebook