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.