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March 28, 2023Account Payable (AP) gets the “short end of the stick” in health systems’ procure to pay (P2P) process. AP is often left resolving exceptions, rushing last-minute payment requests, and struggling to keep the hospital off vendor credit hold. AP corrects upstream P2P mistakes, resulting in more work and backlogs and reducing efficiency. However, many AP departments fail to use one of the most powerful tools available – a recovery audit.
Despite recovery audits often having a bad reputation, TAG's Discovery Review complements AP and Supply Chain departments. We work as an extension of your team to pick up and resolve erroneous transactions that health systems do not have the time to do themselves.
Top 5 Benefits of a Recovery Audit for Accounts Payable
Monitoring AP KPIs
A recovery audit with TAG offers more than simply dollars back to a health system. It provides visibility into unstructured and dark data allowing leaders to track AP Key Performance Indicators (KPIs). This visibility powers leaders to prioritize improvements in internal structure, resource allocation, and more.
Example of KPIs monitored during a TAG Recovery Audit:
- Purchase order (PO) usage
- Days to enter
- Days to pay
- Days to deduct
- Active vendor utilization
- Discount capture rates
- PO After Invoice rates
- Electronic payment utilization
- EDI Rates
- Invoice process volume
- Approval timelines
TAG’s recovery audit provides insight into these KPIs and allows AP departments to break the metrics down by vendor, invoice source, and entity or department.
AP Process Validation and Internal Controls Assessment
A recovery audit can reveal a functional process or one filled with gaps resulting in payment errors. Payment errors, like duplicates and overpayments, reveal process gaps and a lack of internal controls due to staff workarounds.
Not only can a recovery audit provide insight into AP processes, but it also shines a light on the entire P2P process and gaps that may occur upstream. For example, AP may continue to process payments on a recurring contract for a service that is no longer being rendered or an expired contract at a higher cost. This indicates a communication or data entry gap between the supply chain, procurement, and AP.
Identify Data Discrepancies
Furthermore, a recovery audit at TAG aids in identifying data discrepancies in the vendor master file and gaps in available contract data.
AP health system departments are often responsible for maintaining the organization’s vendor master file. A recovery audit can help detect inconsistencies in vendor data (i.e., vendor naming irregularities, vendor address discrepancies, etc.). Fixing these data discrepancies can save AP time in the future when resolving invoice-vendor mismatches and prevent duplicate payments.
Improve Workflows Internally and Across Departments
Moreover, dollars recovered during an audit indicate larger issues in a process. For example, TAG's recovery audit investigates the root cause of payment errors resulting in indicators or process gaps throughout the P2P process. For example, contract information not being entered correctly causes the health system to miss discounts. Working proactively with AP’s counterparts in Supply Chain can improve the entire process and open lines of communication throughout the P2P process.
However, the review also indicates areas inside AP that can help bolster productivity, such as identifying vendors to target for statement collection and distributing vendor assignments for AP staff to balance workloads.
Reduce Future Profit Leakage and Transactional Leakage
Several benefits mention that a recovery audit identifies errors throughout the P2P process, such as incorrect or missing data, erroneous transactions, and missing credits. Armed with this information AP Managers and Directors can prioritize improvement efforts to reduce leaked funds from these errors, saving millions to a health system’s bottom line and time AP staff spends on resolving.
Recovery audits have gotten a bad rep within AP as something that only focuses on calling out errors made by AP staff. However, health systems must shift that thinking and use it as a tool or safety net, acknowledging that issues may be larger than human error. For example, issues may be process-based, lack of data and process visibility, difficulty communicating upstream in the P2P process, or simply a lack of staffing or resources to spend reviewing payments.
TAG’s recovery audit serves as checks and balances for AP and Supply Chain. It’s a tool of discovery into processes and a decision-making aid for leaders. Reach out to learn more about adding this resource to your AP toolkit now.
