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:

  • Health care, audit fees, and utility bills are among the best profit recovery areas to target.

  • Look for opportunities where controls are weak, systems changes have recently been implemented, or where acquisitions have just been completed.

  • Review accounts payable data files for clues, especially the invoice header file and invoice detail file.

  • In mergers and acquisitions, cost savings are more likely when the acquiree has at least $20 million in sales.

  • For a duplicate payments audit, the spend should be at least $10 million before you can expect to find significant savings.

  • For analysis, summarize spend by supplier and then by expense category.

  • Look for suppliers who are sole source providers; could open up for competitive bidding.

  • Look for suppliers who have an increasing cost trend; could open up for competitive bidding.

  • Look at the volume of transactions vs. the dollar spend; plot on a scattergraph.

Related Courses

Cost Management