Published on February 27, 2014
Recovery Audit Services Post-payment audit to recover excess payment from suppliers – through spend analytics and a continuous process improvement to eliminate sources of leakage Gianni Giacomelli Senior Vice President, Genpact Subhashis Nath Vice President, Genpact
A Global Business Process Services Leader: Process Transformation and Outsourcing, Analytics, Technology What we do How we do it We help leaders of some of the largest enterprises transform and run their processes and operations, including the very complex and industry-specific Unbiased, agile combination of process science, related technology and analytics limits upfront costs and enhances future adaptability Right critical mass: • we are large (64,000+ global staff) but our solutions appropriately flexible • our top management is directly involved in our client partnerships Our impact We help enterprises to be more competitive by becoming more intelligent: adaptive, innovative, globally effective and connected… …by enabling tighter management of costs, risks, regulations, and supporting growth The results: US$22B* of impact for 800+ global clients PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 2
THE CHALLENGE PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 3
Companies face multiple challenges related to supplier contracts, making a compelling case for recovery audit Challenges related to contracts • Excess charges levied by vendors due to undue unit rates • Rate/contract amendments not considered • Duplicate charges across consecutive/future invoices • Billing of services not used/delivery mismatches • • Recovered overpayments are literally found money and add directly to a company‟s bottom line • Delay accentuates the problem– The longer the wait, the more difficult it is to identify, validate, and retrieve them Inadequate volume discount • For every $100 million, a 0.1% error margin translates into $100,000 in recovery opportunity Billing for services not contracted • • Duplicate payments due to multiple invoices • Compelling case for recovery audit Overcharging of VAT PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 4
Undue payments to suppliers is a significant issue – up to 0.1% of revenue could be recovered Lack of quality data Inconsistent and incomplete data for a large supplier base and huge transaction volumes makes audit exercise lengthy and difficult Capacity constraints Internal and local teams are often unable to invest enough time to solve systemic process issues leading to repeated errors in payments, year-on-year Inability to identify root causes Companies are unable to address the root causes leading to repeated undue payments to their suppliers Limited incentive to improve processes Traditional external vendors have limited incentive to help improve processes and prevent future errors Late recovery is suboptimal Traditional audits may not be completed until 18 to 24 months post transaction leading to lost documentation and delayed cash flow PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 5
Challenges contributing to recovery vary by industry EXAMPLE Retail • Managing a portfolio of 30,000-60,000 SKUs creates a high volume of purchase-to-pay transactions • Complex pricing arrangements Manufacturing and CPG • Purchases at different frequencies and volumes • Frequent M&A • As a result vendor master data and contracts tend to have overlapping entity relationships PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 6
Up to 12-17% of supplier payment value is ‘leaked’ in an average manufacturing company, of which ~80% is recoverable Top leakage points Data errors and omission 5-7% Unauthorized payments 80-85% 4-5% ~80% 1.5-2% Overpayment 1-2% Duplicate Payment Unusual purchasing behavior 0.5-1% 12-17% PROCESS • ANALYTICS • TECHNOLOGY % „recoverable‟ leakage % value „leaked‟ ~70% ~90% TYPICAL Business impact Operating metrics • Decrease in working capital by up to 3-5% • Increase in cash flow by 2-3% • Bottom line improvement by up to 0.1-0.2% of revenues Process level metrics • 10-15% improvement in payment process integrity • 60-70% transaction level compliance assured • 15-20% increase in best price efficiency ~80% ~80% Source: Genpact experience © 2014 Copyright Genpact. All Rights Reserved. 7
THE SOLUTIONS PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 8
A step by step recovery audit approach A Process diagnostics B Audit Identify cash leakage points through: Audit methodology comprises: • Quantitative diagnostics • Audit analytics • Qualitative diagnostics • Data collection • Substantive testing • Report and recommend C Recovery • Recover outstanding claims • Reports and dashboards D Process transformation Process transformation achieved through application of Lean and Six Sigma, and a scientific process management framework Comprehensive area in scope Accounts payable, procurement and supply chain invoices, contract services, indirect spend and freight, trade promotion funds and pricing, taxes, utilities and telecom PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 9
A Process diagnostics ILLUSTRATIVE What can be achieved • Road map for improved processes (e.g. electronic invoicing) and compliance (e.g. contract amendments for consistency) Key findings • Identify key levers for improvement (incorrect invoice handling, payment terms not compliant with contract, sub optimal freight routing, missed promotional pricing, etc.) contributing to a high cash leakage by process Sample deliverables Delivery approach • Experienced, trained resources deputed on-site for understanding processes and existing gaps • Specialist offshore resources to analyze the past audit results/process data and to assess opportunity size Business impact • Understand dependencies between various functions, businesses and regions • Lean six sigma based solution development to generate actionable recommendations PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 10
B Audit ILLUSTRATIVE What can be achieved • 100% audit of in-scope areas • Feedback loop into continuous process transformation • Improving internal control systems Delivery approach • Dedicated supplier recovery audit practice available for global deployment • Audit payments on a historical or real-time basis to recover incorrect payments using industry standard tools e.g. Oversight Sample deliverables Days to payment trend analysis • Reduced recovery year-on-year by up to 15-20% through improved processes • Collaborative approach with client and their suppliers facilitating claim recovery • Provide formal reporting to client and feed root causes into continuous process improvement PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 11
C Recovery ILLUSTRATIVE What can be achieved • An efficient and effective recovery process leading to 8090% recovery/adjustments within a period of 3 months • Identification of non-compliant suppliers to inform supplier scorecards • Satisfied supplier network through effective complaint management Delivery approach • Dedicated calling team with multilingual capabilities, right staffing at the right window in a near shore/offshore model based on client requirements • Secure access to information about outstanding claims by supplier • Accurately connect with identified contact at best time/method of approach in agreement with the client and its suppliers PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 12
D Process transformation What can be achieved ILLUSTRATIVE • Eliminate root cause of cash leakage resulting in efficient and effective supplier payment and related upstream processes • Reduction in year-on-year post audit recovery by up to 1520% • Optimized supplier network integration throughout the S2P lifecycle Key performance measures 47.2% Effectiveness of IA recovery Delivery approach • Onshore activities − Due diligence on client requirements, existing processes and transformational to-be state − Implement technology customized to client requirements − 86% 1.2MM 4.2MM Efficiency Claim denials 2% 12% Execute process improvements • Globally delivered activities − Develop comprehensive blueprints for process and transactional excellence − Median Six sigma/ process experts working on identifying bottlenecks − Genpact Best In Class Continuous process monitoring for adherence to accepted operational metrics PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 13
CONTACT GENPACT TO EXPLORE THE “ART OF THE POSSIBLE” PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 14
About Genpact Genpact Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent through becoming more adaptive, innovative, globally effective and connected to their own clients. Genpact stands for Generating Impact – visible in tighter cost management as well as better management of risk, regulations and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. Our approach is distinctive – we offer an unbiased, agile combination of smarter processes, crystallized in our Smart Enterprise Processes (SEPSM) proprietary framework, along with analytics and technology, which limits upfront investments and enhances future adaptability. We have global critical mass – 62,000+ employees in 24 countries with key management and corporate offices in New York City – while remaining flexible and collaborative, and a management team that drives client partnerships personally. Our history is unique – behind our single-minded passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 15 years. For more information, visit www.genpact.com. Follow Genpact on Twitter, Facebook, and LinkedIn. PROCESS • ANALYTICS • TECHNOLOGY © 2014 Copyright Genpact. All Rights Reserved. 15
Thank You Gianni.giacomelli[at]genpact.com Subhashis.nath[at]axisindia.co.in www.genpact.com/home/solutions/finance-accounting/recovery-audit-services
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