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Mary Schaeffer
Mary Schaeffer

Improve Your Bottom Line

Recover the easily identifiable overpayments yourself.

August 4, 2011
by Mary Schaeffer

Whenever the topic of payment-recovery auditors is raised, people in the room often put on their no-way-Jose faces. They argue that auditors charge too much or recover funds they could easily get back themselves — if they had the time. And therein lies the problem. Savvy professionals can find and recover many duplicate and erroneous payments on their own, but they don’t because they don’t have enough time. In the end, many organizations leave that unrecovered money with their vendors. As most reading this are ever so painfully aware, only a few vendors return duplicate payments or voluntarily provide information about outstanding credits.

I strongly advocate the use of recovery auditors working on a contingency basis — after you’ve recovered the easily identifiable overpayments yourself. I also recommend that readers with limited resources pursue the three suggestions discussed below, and then call a contingency auditor to get the rest for them.

The States

Probably the easiest funds to find are those that have been turned over to the states in your name. However, this comes with a huge caveat. Take this step only if you are currently reporting and remitting your unclaimed property to the states. If you are not, your inquiry can very well trigger an audit that is likely to result in a larger payment than what you will receive back from them.

If in compliance, go to missingmoney.com and look for funds in your organization’s name as well as any Doing Business As (DBAs) and abbreviations or variances that your suppliers may use. When you find funds, fill out the requisite paperwork and wait. Given the current fiscal pressures, some states are taking a bit of time to return funds to their rightful owners.

The caveat also applies to work auditors have done on your behalf. If you are not in compliance or simply prefer not to deal with the states, instruct your auditors not to go after state-held funds. Some do this as a matter of course. Note that if you are not in compliance, it is best to get in compliance before going after your money.

Deposits

If your accounting system is capable of generating a list of all deposits given in the last 10 years, analyze the list and determine which should have been returned. It is possible some of the older deposits were turned over to the states. Once you’ve identified the deposits no longer needed, go after them.

Besides rental real estate, there are many other places deposits may be required. These include the post office, some telecommunication services, computer and photocopying equipment leases and other items.

If your system is not capable of generating such a list, start tracking deposits so you can retrieve them in the future.

Vendor Credits

Many vendors send out customer statements regularly. Many of these same vendors routinely suppress the inclusion of outstanding credits on these statements.

It is imperative that you request statements from all vendors. Emphasize that you’d like them to include all activity not just open invoices. Locate and collect open credits. Some vendors like to insist that you use the credits to purchase more goods from them. If your terms and conditions don’t dictate this, vendors have no legal right to demand such additional purchases.

Ideally, you should request open credits be sent to you separately from any invoice you are paying currently. This creates a clear audit trail. If you use them to reduce an existing invoice payment, make sure you document what you do, so you will have the necessary documentation to prove that suppliers have been paid.

There are several vendors who will go after vendor credits for you at a rate lower than their contingency fee for other types of recoveries. Should you not have the staff to handle this task for you, negotiate with an auditor to handle it.

Conclusion

Once you have collected everything within your capacity, you can call in the big guns. Without them the money is gone forever. Better to pay someone to recover all the money for you and add something to your bottom line, than do nothing and get nothing in return.

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Mary S. Schaeffer is the author of Controller & CFO’s Guide to Accounts Payable and Fraud in Accounts Payable: How to Prevent It. She publishes CFO & Controllers Accounts Payable Management Journal, writes a monthly newsletter, the weekly e-AP News and speaks at webinars and conferences.