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How to perform a spend recovery project

Read about the Deloitte point of view on best practices for accounts payable spend recovery. This will get you started on independently performing your spend recovery project, without being reliant on third parties. It will also help you navigate some of the challenges you may encounter during your project.

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Duplicates

Deloitte has found that accounts payable recoveries typically come from three areas, in approximately equal proportions:

  • Duplicate payments
  • Untaken credit notes
  • Under recovered VAT


Why should I conduct a duplicate payments review?

We are often told that:

  • Our accounts payable system prevents duplicate payments
  • Our auditors would find any errors
  • I have a very experienced team; they don’t make mistakes

We recommend regular duplicate payment reviews because the comments above are not always correct. >


Our accounts payable system prevents duplicate payments

Systems are designed to warn of potential errors. They usually test four input fields:

  • Supplier number
  • Invoice number
  • Invoice date
  • Gross amount

If all four fields are the same, an on screen warning will usually appear. The team member then checks whether it is in fact the same invoice. If it is the same invoice, it should be rejected. If it’s a different invoice, the system may be overridden.

However, the necessary checks are not always carried out. Staff sometimes override the system, or add a full stop or other symbol after the invoice number.

Many errors occur when one of the fields is entered differently. This might be by design, where there are two supplier files for the same supplier, or accidentally, where a character is mistyped.


Accounts payable systems usually miss these common errors:

  • You have a supplier file called BT and another called BT Plc. They have different supplier numbers. The same invoice is paid on both
  • You have a supplier called OCS Ltd T/A Canon Hygiene, and two supplier files, one called OCS Ltd and the other called Canon Hygiene. The same invoice is paid on both
  • Invoice number ABC 123 is entered twice, with and without the space between the letters and numbers
  • Two digits are transposed, allowing the same invoice to be entered twice
  • A date is mistyped, for example 1/03/15 and 12/03/15. This allows the same invoice to be entered twice
  • You have two unrelated suppliers with similar names, for example Azzurri Office Design and Azzuri Restaurant. The invoice is paid to the wrong supplier. Later, the correct supplier chases payment. Their supplier file is checked, but the invoice isn’t on it. A copy is provided, entered onto the correct supplier file and paid. The same invoice has now been paid twice, once correctly and once to a completely different supplier. The supplier receiving the error payment doesn’t always volunteer a refund or show the credit on your statement
  • Credit note number XYZ321C for £500 is entered incorrectly and paid as an invoice. The supplier now owes you £1,000, but doesn’t always volunteer a refund or show the credit on your statement


Our auditors would find any errors

Audits usually involve the testing of a sample of your transactions rather than every single item. Most transactions are completed correctly. Moneyback tests all your accounts payable transactions for errors.


I have a very experienced team; they don’t make mistakes

The vast majority of your transactions will be processed correctly. Where mistakes are made, they will usually be identified and corrected in the normal course of business. However, it is very unlikely that there will be no uncorrected errors. This is not a reflection on your team, but simply of the fact that sometimes people do make mistakes.


Why should I do this in Moneyback?

  • Focus your time most effectively. Each query has a Priority score to suggest which one to review next. The score is calculated according to its value and Moneyback’s assessment of the likelihood of error
  • Create your emails to suppliers at the click of a button. Moneyback even attaches details of the items included within each payment that you query
  • Keep detailed notes within Moneyback of each conversation with a supplier
  • Use the included diary system to ensure you follow up each query when you need to
  • Automatically generate management information about types of error, and use this to identify any training needs or process improvements
  • Moneyback includes best practice guides, suggesting how to approach your recovery work

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VAT

Deloitte has found that accounts payable recoveries typically come from three areas, in approximately equal proportions:

  • Under recovered VAT
  • Duplicate payments
  • Untaken credit notes


What is the Moneyback VAT test?

Moneyback compares all the invoice data uploaded for each supplier, and identifies those invoices where:

  • VAT does not appear to have been reclaimed, and
  • VAT has been reclaimed on at least 95% of the invoices on that supplier file


How do VAT errors occur in Accounts Payable?

  • The invoice is poorly laid out
  • Human error


Why should I conduct a VAT review?

We are often told that:

  • Our auditors would find any errors
  • I have a very experienced team; they don’t make mistakes

Let’s examine each of these comments:


Our auditors would find any errors

The value of VAT recovered is usually checked against the expectations of the audit team, and not tested in detail. In addition, VAT is sometimes considered not to be material to the audit, and so not tested at all. Moneyback tests all your accounts payable transactions for errors.


I have a very experienced team; they don’t make mistakes

The vast majority of your transactions will be processed correctly. Where mistakes are made, they will usually be identified and corrected in the normal course of business. However, it is very unlikely that there will be no uncorrected errors. This is not a reflection on your team, but simply of the fact that sometimes people do make mistakes.


Why should I do this in Moneyback?

  • Keep detailed notes within Moneyback of your investigations into each item
  • Automatically generate management information, and use this to identify any training needs or process improvements
  • Moneyback includes best practice guides, suggesting how to approach your recovery work

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Missed credits

Deloitte has found that accounts payable errors typically come from three areas, in approximately equal proportions:

  • Untaken credit notes
  • Duplicate payments
  • Under recovered VAT


Why should I conduct a supplier statements review exercise?

There may be credit notes on supplier statements which are not recorded on your accounts payable system. There is significant variation between organisations regarding the emphasis placed on supplier statement reconciliations. Whilst some organisations are excellent at implementing these, others are not.


Barriers to identifying untaken credit notes

  • Many organisations do not have a process for obtaining supplier statements
  • Others don’t implement it rigorously
  • We have seen examples of suppliers suppressing statements showing untaken credit notes


Credits are not always prioritised

  • Suppliers rarely chase for credit notes to be taken, but do call regarding unpaid invoices. The credit note can move down the priority list of the team and eventually be lost


Why should I do this in Moneyback?

  • Keep detailed notes within Moneyback of each conversation with a supplier
  • Use the included diary system to ensure you follow up each query when you need to
  • Automatically generate management information, and use this to identify any training needs or process improvements
  • Moneyback includes best practice guides, suggesting how to approach your recovery work

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Best practices

Duplicates

Why have these queries been identified?

Deloitte’s sophisticated matching technology has analysed your data for potentially duplicate payments. Typical causes of these include:

  • Multiple supplier files
  • Wrong supplier paid
  • Similar invoice numbers
  • Transposed digits


How can I resolve each query?

Step 1 - scan the list of queries by eye

  • Use your local knowledge to exclude items that you don’t need to investigate. For example, you may already be in discussion with the supplier about a particular item
  • It is likely that you will be able to exclude most of the queries identified

Step 2 – consider how to prioritise the queries

  • Moneyback suggests which item to investigate next, based upon a combination of value and the estimated probability of error
  • Use this together with your local knowledge to use your time most effectively. For example, if you know that a particular supplier is in financial difficulty, you may decide to contact them first

Step 3 – check your general ledger for refunds

  • Moneyback has excluded queries where it has detected a refund to the supplier file. However, many organisations post some or all refunds to their General Ledger. These are not within the Moneyback data
  • If a refund has already been made, record that in Moneyback and close the query
  • If no refund has been made, proceed to Step 4

Step 4 – contact the supplier

  • We have found that queries are usually resolved more quickly and with less chasing if they are raised by email
  • If you do not have an email address for the right person at the supplier, or if you don’t know who the right person is, then phone to request that information
  • Moneyback automatically generates a suggested email. It even attaches details of all items within each payment. It will show that the item being queried was listed within both payments

Moneyback will automatically email the query to the email address you have registered. Please forward it from there to the supplier. There are two reasons for this:

  • The supplier cannot reply to the Moneyback email address
  • The supplier will not recognise the email as coming from your organisation. They will often regard it as suspicious, and delete it unanswered

Make a note within Moneyback that you have contacted the supplier about each item.

  • Use the included task system to record when you wish to chase for a response
  • We recommend following up every 3 business days. You can vary this if you need to, for example, if you know that your contact at the supplier is on holiday


Supplier responses

You’re right - I’ll send a BACS refund/credit note

  • This is the ideal response. Thank them and ask when it will be received. Note this in Moneyback and diarise to check receipt
  • A credit note will usually be offered rather than a refund. Only accept this if there are unpaid invoices of at least equivalent value on the supplier file
  • If you do not trade with this supplier regularly, consider blocking payment of the invoices until after the credit note has been received
  • If you no longer trade with the supplier, request a BACS refund

Keep notes of your conversations in Moneyback, and diarise to follow up.

You’ve only paid it once

  • You have provided details of the items included within each remittance; you know that it has been paid twice
  • Ask how each payment was allocated

Keep notes of your conversations in Moneyback, and diarise to follow up.

It’s been allocated to another invoice

  • Ask which of your colleagues authorised the allocation
  • Ask to which invoices each payment was allocated

Suppliers frequently allocate overpayments to unpaid invoices. They often do so without obtaining authorisation from their customer.

There are two potential issues with this:

  • You may have paid that invoice separately. The overpayment is still due to you
  • If you haven’t paid the invoice, it may not have been through your authorisation procedures and payment agreed; it may be in dispute

The correct way to deal with this:

  • The supplier unallocates the payment
  • They issue a credit note
  • You deduct it from your next remittance
  • They also issue a copy of the unpaid invoice
  • You review it in accordance with your usual procedures, and pay it if appropriate

Keep notes of your conversations in Moneyback, and diarise to follow up.

I haven’t had time / It’s too difficult / I can’t be bothered

  • Explain that the query must be resolved. Ask what they think would be a reasonable timescale to investigate and respond
  • If they refuse, or provide an unreasonable timescale, then explain that you need to escalate the matter

On occasion it can be effective to escalate several levels, asking for the next level of seniority each time. Escalation may be:

  • Informal: To whom should I escalate this today?
  • Formal: Please email details of your complaints procedure

When deciding how to approach the dispute, consider these points:

  • The need to maintain a good working relationship with the supplier
  • The value of the item being disputed
  • Your level of confidence that the funds really are due
  • The amount of time and effort needed to pursue the matter

Be pragmatic. Even if you are certain that you are correct, is it worth entering into a dispute with this supplier for the sum involved? Keep notes of your conversations in Moneyback, and diarise to follow up.


Disputes

We have seen instances of:

  • Debit notes being raised without the agreement of the supplier
  • Legal action, or the threat of it, being issued

We recommend caution

  • It is better to work with the supplier if possible
  • On the very rare occasions when agreement cannot be reached regarding a material amount, we consider it essential that legal advice is received before any action is taken


Why do I need to record all this in Moneyback?

  • Keep detailed notes within Moneyback of each conversation with a supplier
  • Create your emails to suppliers at the click of a button. Moneyback even attaches details of the items included within each payment that you query
  • Use the included diary system to ensure you follow up each query when you need to
  • Automatically generate management information showing error types, and use this to identify any training needs or process improvements
  • All the information is in one place; it is easy for a colleague to deal with queries in your absence

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VAT

What is Moneyback VAT best practice?

We suggest that you examine each invoice identified by Moneyback. If the invoice does not show VAT then record that within Moneyback and close the query. If the invoice does not show VAT:

  • Ask your VAT expert whether the VAT may be reclaimed
  • Record details of their response within Moneyback


Why do I need to record the information in Moneyback?

  • Keep detailed notes within Moneyback of each conversation with your VAT expert
  • Automatically generate management information, and use this to identify any training needs or process improvements
  • All the information is in one place; it is easy for a colleague to deal with queries in your absence

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Missed credits

What is statements review best practice?

Moneyback analyses your data and suggests which suppliers should be approached, and the order in which they might be prioritised. This feature supports the local knowledge of your team. Moneyback lists all the suppliers within your data and shows:

  • A suggested priority for that supplier
  • The value and volumes of transactions for each supplier
  • Those predicted to be most likely to yield results

We recommend that statements are reconciled for all suppliers identified by Moneyback as most likely to yield results. You can then decide whether to perform statement reconciliations on additional suppliers based on the results you have achieved.


What is the statements review process?

  • Decide which suppliers you wish to approach, based on the Priority score and your local knowledge
  • Contact them by email. We suggest that you request a statement of open items within 7 days. Open items include: invoices issued but not paid; untaken statement credits; and unallocated payments on account

Use Moneyback to record:

  • Which suppliers you have approached
  • Details of emails and phone calls
  • When to follow up with them if no response has been received

If no response is received within 7 days:

  • Follow up by telephone
  • Say that you are following up the email and ask for the statement to be emailed
  • Offer to resend a copy of the request if it has not been received
  • Diarise to check the next day and call again if you have still not received the statement

Supplier staff will sometimes say that “You need to speak to Bill, but he’s not in today”. In that case, ask when he will next be in the office, and diarise to call him on that day. We do not advise that you rely on supplier staff to pass on messages; it is usually more productive to call again.


I’ve received the statement, what should I do next?

Compare the open invoices and credits with those on the relevant supplier file on your accounts payable system. If your records agree with the supplier statement:

  • Note that within Moneyback. This will show that the task has been completed, and will be reflected in the management information that Moneyback generates
  • No further action is needed in relation to that supplier statement

If the statement shows open items not recorded on your accounts payable system:

  • Perform a statement reconciliation
  • If you do not have all the invoices and credit notes shown, ask the supplier for copies
  • Keep notes of the conversation within Moneyback, and diarise to follow up
  • Once the copy documents have been received, process them in your usual way, either paying outstanding invoices if appropriate, or deducting credit notes from your next payment to that supplier
  • Record within Moneyback to show the recovery of the credits within the management information

If a credit is found on a supplier with whom you have no current business

  • Request a BACS refund
  • Note within Moneyback
  • Diarise to follow up as necessary


The supplier is disputing a statement credit, how should I approach this?

This is usually best done by telephone in the first instance. Relationships with suppliers can be critical, and great care should be taken not to damage them.

  • Ask for a copy of the credit note and an explanation
  • Why would the statement show it as an open item if it isn’t available for you to take?
  • Make sure you fully understand the response and agree with it; if not, then seek a clarification

You may sometimes be told that the credit can’t be taken “because my manager says it’s a mistake, it shouldn’t be on there”.

  • Speak to the person who has made the decision. You may sometimes need to press for this
  • When you speak to the decision-maker, explain that you have been told that the credit isn’t available to take, but that you don’t understand why and would like it to be explained

If you receive a response that you understand and agree with then record this within Moneyback and take no further action. If you do not understand or agree:

  • Explain why and ask for a further response
  • If agreement cannot be reached, consider whether to escalate the matter. This may be done informally, “I’d like to escalate this, who should I contact about this today?”, or formally “Please email to me details of your complaints procedure”

When deciding how to approach the dispute, consider these points:

  • The need to maintain a good working relationship with the supplier
  • The value of the item being disputed
  • Your level of confidence that the funds really are due
  • The amount of time and effort needed to pursue the matter

Be pragmatic. Even if you are certain that you are correct, is it worth entering into a dispute with this supplier for the sum involved?


Disputes

We have seen instances of:

  • Debit notes being raised without the agreement of the supplier
  • legal action, or the threat of it, being issued

We recommend caution

  • It is better to work with the supplier if possible
  • On the very rare occasions when agreement cannot be reached regarding a material amount, we consider it essential that legal advice is received before any action is taken


Why do I need to record all this in Moneyback?

  • Keep detailed notes within Moneyback of each conversation with a supplier
  • Use the included diary system to ensure you follow up each query when you need to
  • Automatically generate management information, and use this to identify any training needs or process improvements
  • All the information is in one place; it is easy for a colleague to deal with queries in your absence

Back to top

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