Cost Recovery: Turning Your Accounts Payable Department into a Profit Center

About the Author xiii

Foreword xv

Preface xvii

Acknowledgments xxi

How to Use This Book xxiii

CHAPTER 1 Benefits of Recovery Services 1

U.S. General Accounting Office Report “Recommends” Recovery Auditing 1

Top Benefits of Cost Recovery 2

Top Reasons for Recovery 4

Recovery Estimates—Embrace the Uncertainty 5

When Recovery Becomes Fraud 6

Sarbanes-Oxley Implications 9

CHAPTER 2 Overcoming Obstacles to Getting Recovery Started 15

Overcoming Obstacles to a “No Brainer” Service 15

Why Internal Audit Department Are Sometimes the Worst Resource for Doing Recovery Audits 19

Why Internal Audit Departments Are Truly the Best Resource for Doing Recovery Audits 20

Why Select a Provider for Your First Audit 23

CHAPTER 3 Assessing Opportunities and Risk 25

Focusing on the Largest Fish 25

Scattergraphing: A Powerful Tool to Identify Changes in Company Activity 27

Going Deeper and Data Auditing Vendor Accounts 30

Using Vendor Toolsets 33

The Top 10 Questions to Ask When Deciding to Do a Recovery Audit 33

CHAPTER 4 The Overall Cost Recovery Marketplace 36

How the Industry Worked in the Past 36

Recovery Consulting Today 37

The Evolving and Continuous Recovery Process at Companies 38

Why Recovery Consulting Is so Popular 39

Dimensions of Recovery 41

Recovery Categories 44

How the Recovery Areas Are Defined in This Book 47

CHAPTER 5 Accounts Payable and Procurement 49

Case Study 5.1: American Auto Runs a Tight Ship 49

Case Study 5.2: Public Utility with Staffing Problems 51

Case Study 5.3: Contract Compliance with Pinpoint Profit Recovery Services, Inc. 53

Case Study 5.4: International Personal Goods Manufacturer with Retail Outlets 54

Case Study Wrap-Up 56

Recoveries to Find 58

Questions to Ask When Assessing the Opportunity 59

Conclusion 62

CHAPTER 6 Advertising Agency Audits and Media Reviews 63

Overview 63

Case Study 6.1: Reluctant Marketing Department Hiding Its Intentional Agency Benefit 63

Case Study 6.2: Exit Audit after an Agency Transition 64

Case Study 6.3: Media Management 65

Case Study 6.4: Global Software Company 66

Case Study Wrap-Up 67

Recoveries to Find 71

Prioritizing the Opportunity 73

Conclusion 74

CHAPTER 7 Audit Firm Benchmarking 76

Overview 76

Case Study 7.1: An Auditor in Trouble? 77

Case Study 7.2: Utility Service Firm Paying too Much 81

Case Study Wrap-Up 84

Recoveries to Find 87

Questions to Ask 87

Conclusion 87

CHAPTER 8 Escheatment (Unclaimed Property) 88

Overview 88

Case Study 8.1: Accounts Receivable Overcrediting 92

Case Study 8.2: Pinpoint Profit Recovery Assists Large Services Corporation 93

Case Study Wrap-Up and Recoveries to Find 96

Questions to Ask When Assessing the Opportunity 99

Conclusion 100

CHAPTER 9 Freight Bill Auditing 101

Overview 101

Case Study 9.1: When Freight Classes and Descriptions Make a Difference 102

Case Study 9.2: Aluminum Manufacturer and Distributor Post-Audit 102

Case Study Wrap-Up 102

Recoveries to Find 107

Questions to Ask 108

Conclusion 108

CHAPTER 10 Health Benefits Auditing 109

Overview 109

Case Study 10.1: Midwest Municipality Cuts Costs 111

Case Study 10.2: Employer Takes Control 114

Case Study 10.3: Holding Company Uses Comparison to Advantage 116

Case Study Wrap-Up 117

Recoveries to Find 121

Questions to Ask 122

Conclusion 123

CHAPTER 11 Lease Audits 124

Overview 124

Case Study 11.1: The Portfolio Assessment of a National Consulting Firm 125

Case Study 11.2: Variety of Issues at a National Banking Corporation 126

Case Study 11.3: Park Avenue, New York City, with Inappropriate Cleaning and Utility Costs 127

Case Study 11.4: Multinational Corporation Audits One Lease for Big Savings 129

Case Study Wrap-Up 130

Recoveries to Find 133

Questions to Ask When Assessing the Opportunity 134

Conclusion 135

CHAPTER 12 Order to Cash Reviews 136

Overview 136

Case Study 12.1: Construction Materials Not Reporting All Cement Loads or Pricing Them Properly 136

Case Study 12.2: Too Many (Fraudulent) Fourth-Quarter Sales 138

Case Study Wrap-Up 139

Recoveries to Find 141

Questions to Ask When Assessing the Opportunity 143

Conclusion 148

CHAPTER 13 Payroll Tax Credits 150

Overview and Recoveries: Savings to Find 150

Other Federal Programs 153

State and Local Incentives and Credits 154

Questions to Ask When Assessing the Opportunity 154

Conclusion 155

CHAPTER 14 Proactive Fraud Audits 156

Overview 156

Case Study 14.1: Association of Certified Fraud Examiners Report to the Nation 158

Case Study Wrap-Up 159

Recoveries to Find 174

Questions to Ask When Assessing the Opportunity 175

Conclusion 175

CHAPTER 15 Project Fraud Audits 177

Overview 177

Case Study 15.1: California State Welfare Automation Project 178

Case Study Wrap-Up 180

Recoveries to Find 183

Questions to Ask to Assess the Opportunity 184

Conclusion 186

CHAPTER 16 Real Estate Cost Segregation 187

Overview 187

Case Study 16.1: Franchise Restaurant 188

Case Study 16.2: Apartment Complex 189

Case Study 16.3: Assisted Living 191

Case Study 16.4: Two-Story Medical Office Facility 192

Case Study Wrap-Up 193

Recoveries to Find 194

Questions to Ask When Assessing the Opportunity 195

Conclusion 199

CHAPTER 17 Research and Development Tax Credits 200

Background 200

Case Study 17.1: Engine Service Firm R&D Credits 201

Case Study Wrap-Up 203

Questions to Ask When Assessing the Opportunity 208

Conclusion 208

CHAPTER 18 Strategic Sourcing 210

Overview 210

Case Study 18.1: $1.6 Million in Annual Savings for Food Distribution Company 211

Case Study 18.2: Private College Saves More than $200,000 212

Case Study 18.3: Multi-Project Strategic Sourcing 212

Case Study Wrap-Up 214

Recoveries to Find 219

Questions to Ask When Assessing the Opportunity 221

Conclusion 221

CHAPTER 19 Telecommunications Auditing 223

Overview 223

Case Study 19.1: Refund of Local Service Charges at a Transportation Company 224

Case Study 19.2: Future Savings of Local Service Charges at a Multi-Location Retail Chain 224

Case Study 19.3: California School District 225

Case Study 19.4: Future Savings of Wireless Charges at a Media Company 225

Case Study Wrap-Up 226

Recoveries to Find 227

Questions to Ask 230

Conclusion 230

CHAPTER 20 Travel and Entertainment Reviews 231

Overview 231

Case Studies 20.1: How to Make $20,000 in One Year, Tax-Free: Specific Schemes 232

Case Study Wrap-Up 233

Automation Benefits 236

Recoveries to Find 237

Questions to Ask When Assessing the Opportunity 238

Conclusion 239

CHAPTER 21 Utility Reviews 240

Overview 240

Case Study 21.1: Fortune 1,000 Manufacturer Cuts Its Utility Costs in Several Ways 241

Case Study 21.2: Hospital Water Cost Leak Plugged 242

Case Study 21.3: Small Town Manufacturer—Electric Refund 244

Case Study 21.4: Entertainment Company with Multiple Locations Chooses Deregulation for Select Sites 245

Case Study Wrap-Up 246

Recoveries to Find 247

Questions to Ask When Assessing the Opportunity 248

Conclusion 249

CHAPTER 22 Selecting a Provider 250

Overview 250

Applying Discipline . . . It’s a Good Thing 250

Step 1: Form the Team 251

Step 2: Set Requirements and Success Metrics 252

Step 3: Draft a Request for Proposals 253

Step 4: Negotiate 257

Step 5: Complete Decision Analysis 260

Conclusion 262

CHAPTER 23 Technology Used in Recovery Efforts 263

Introduction 263

Data Analysis/Mining/External Data 265

Assessing Vendors against Watch Lists 282

Making the Scattergraph 286

Continuous Monitoring 288

Pre-Formatted Workpapers/Process Workflow/Client Management Dashboards 293

Conclusion 295

CHAPTER 24 Conclusion 298

Where Do We Go from Here? 298

What Else Can You Do? 298

APPENDIX 1 Additional Publications Related to Business Cost Savings 301

APPENDIX 2 Accounts Payable 304

Risk Assessment Questions by Profit Leak 304

APPENDIX 3 Records Retention and Right to Audit 312

APPENDIX 4 Discussion Paper Continuous Controls Monitoring with ACL AuditExchange 2009 and Scripted

Analytics 314

Purchasing Payables and Payments 315

ACL AuditExchange 2009 316

Purchase-to-Payment Cycle: Critical Processes and Activities 316

ACL Analytics Technology 317

Customer Successes 319

Client Benefits 319

APPENDIX 5 Tapping the Strategic Potential of Procurement 322

Challenges 324

Key Success Factors 326

Fulfilling Potential 330

Index 331