What is Profit Recovery

About Profit Recovery A recovery audit firm performs a rigorous review of a company’s disbursements to uncover funds that may be due back to the enterprise because of duplicate payments, overpayments or failure to take credits and deductions. The firm, for a fee, then pursues the recovery of those funds. Such reviews typically find significant amounts, but are difficult to discover and identify through a standard accounting audit.

The companies that benefit most from a recovery audit are those where controls are weak, systems changes or acquisitions have recently occurred or where there is a high volume of purchases and complex sales tax jurisdictions. Companies should start with a thorough review of their accounts payable data files, especially the invoice header file and invoice detail files.

In addition to conducting recovery audits, a company should also invest in prevention tools that will reduce credits to recover and fees paid to the recovery firm. Investing in electronic PO paper, implementing cost-reduction initiatives like savings assessments and vendor compliance and eliminating dual payment processes will significantly impact the number of credits to recover and recurring fees. Also, rewarding the employees that identify good recoveries will help to promote an atmosphere of problem solving and customer satisfaction. For example, Federal Express rewards the best employees with a gold pin and recognition in their employee newsletter.

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