Profit Recovery is an auditing process where a firm performs a rigorous review of a company’s accounts payable disbursements and uncovers funds that may be owed to the enterprise due to duplicate payments, overpayments or failure to take credits or deductions. For a fee, the firm then pursues those invalid payments in order to recover the funds that were incorrectly paid out to vendors.
While a firm can help a company discover these errors, it is important that companies do their own follow-up in order to ensure that all credits are recovered. This can be done by implementing preventative measures, such as eliminating PO paper invoices and ensuring that all invoices are fully entered into the systems. A full follow-up should also be made to ensure that all correspondence is sent to the correct vendor. This will keep the supplier relationship intact and reduce the number of credits to be recovered.
Companies that have a high volume of purchase transactions in an environment with varying discounts and pricing schedules, complex sales tax jurisdictions or multiple accounting systems should consider using a profit recovery audit firm. Any company that has experienced significant change, such as a major systems implementation or a merger or acquisition should also consider hiring one of these firms.
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