You expect your recovery audit firm and their auditors to plow through mountains of paper documents, but unless they’re also auditing the unstructured data that lives outside your purchase-to-payment systems, they might be missing important overpayments.

Did you know that a typical large grocer likely negotiates over 1 million promotional and pricing agreements (“deals”) each year with vendors?  While retailers continue to invest in automation to handle the transaction-intensive purchase-to-pay environment, we have seen a growing trend for buyers and sellers to negotiate and modify these deals through email.  Often, some of these email-negotiated terms don’t get captured in the buyer’s or the seller’s financial systems or formal records, and when they don’t, mistakes happen, overpayments are made and profits are leaked. 

Because of this risk of lost profits, we recommend that retailers evaluate including emails between buyers and sellers as a recovery audit data source.  And if retailers decide that emails should be included, your recovery audit team, whether internal or from a third-party, needs specialized tools and capabilities. 

We believe PRGX was the first firm in the industry to develop sophisticated data mining audit software that can scan and filter emails to identify hidden deals and other terms that our auditors then use to identify and recover overpayments.  Take, for example, the retailer who negotiated a discount with an electronics manufacturer on a particular SKU.  The buyer who brokered the deal moved to a new position, and the purchasing system was never updated to reflect the lower cost.  Using our proprietary email technologies, our audit team was able to scrutinize over 100,000 emails between the vendor and buyer, discovered a negotiated lower price and identified over $300,000 in overpayments.

If your company is evaluating whether to include buyer-seller emails in the recovery audit process, you should:

• Create a work team with merchandising, human resources, and legal representatives
• Ask your IT department to determine current email retention periods and what filtering capabilities are available within existing email messaging systems
• Ask your third-party recovery audit provider to:
  • review how they handle email data security and privacy
  • describe different options to capture, extract and process historical and new email data
  • share success stories and key learnings from other implementation
  • help you quantify the potential opportunity being missed
• Then evaluate the potential benefits, costs, and other key issues
• If justified, consider a small pilot project, perhaps for one or a few buyers’ emails, to validate the work team’s findings and assumptions

As the volume of hardcopy negotiation files declines, it is becoming clear that more and more discounts, rebates and promotions are being negotiated through email. We believe that including buyer-vendor emails in the recovery audit process is critical to identifying overpayments.  The number of retailers who have embraced this emerging best practice continues to grow.  In fact, our experience is that those retailers may find up to 20-40% in additional recoveries by incorporating unstructured email data sources into the recovery audit process.

If you have questions about including buyer/vendor emails as an audit data source, contact us at .(JavaScript must be enabled to view this email address).