Root cause analysis: essential in today’s Recovery Audits

Getting to the heart of the problem is essential in many industries. For companies in all industries, it is important to analyze why something went wrong and how it can be prevented in the future. This is fundamental to success. The same goes for Recovery Audits.

Recovery Audits have become a go-to mechanism for recovering losses that occur due to erroneous payments, undue payments and duplicate payments. But as useful as these audits are for recovering money, isn’t it better if the money had never gone away?

Through their years of experience, recovery auditors can uncover hidden factors that cause the organization to miss out on profits. By applying their proven methods, data analysis and their years of expertise, these factors can be addressed. Due to the growing ability to detect these errors in advance, a recovery audit changes from a retrospective to a proactive exercise. A root cause analysis is fundamental to this change.

How recovery audit is changing

Finance teams have always had to strike a balance between stopping the leakage of money and staying efficient. In a large company where thousands of invoices come in every month, it is practically impossible to view them all manually.

That’s why Recovery Audits became the best practice. What has changed is the speed with which Audit information can be converted into usable data. Years of experience combined with technological advancement enable our Auditors to use what they have learned, to uncover underlying issues within the financial processes. When these issues are addressed, sustainable long-term controls can be implemented to stop losses before they occur.

What is a root cause analysis?

Root cause analysis is the process of discovering the underlying leakage sources to identify the weaknesses in a process and suggesting ways to resolve them. By finding out what causes erroneous payments in the first place, the accounts payable, finance and commercial teams are in a better position to prevent them before they happen.

It is much more effective to systematically prevent and resolve invoice errors at the source, rather than constantly looking back to make up for past losses. Root cause analysis is performed using a combination of best practice methodologies, data analysis tools, and auditor expertise to identify the sources of an event or trend. It looks beyond superficial causes, such as human error, to show where processes or systems have failed, or may have caused the problem in the first place.

In a Recovery Audit, a root cause analysis has three main goals:

  1. Discover the source of every invoice error
  2. Understand how to prevent mistakes from repeating themselves
  3. Use what you learn to prevent similar mistakes from recurring in the future

Advantages of a root cause analysis

Recovery Audits use root cause analysis to design or adjust financial controls in such a way that the risk of recurring undue payments is proactively eliminated. Instead of just dealing with the symptoms of errors, the root cause analysis can focus on a specific supplier or purchase category, and suggest additional checks before approving an invoice within those parameters.

Recovery Audits are an effective way to identify past undue payments and recover losses through claims. By diagnosing the actual cause of a problem, you can cure it instead of treating the symptoms endlessly.

Where is the root cause analysis in the recovery process of SpendLab?

During a Recovery Audit, SpendLab processes a lot of data from your organization. As a result, it is fundamental that a correct standard method has been developed to perform the Recovery Audit. At SpendLab, this process looks like this:

  1. Collect open item lists from all your suppliers
  2. Analyzing the data obtained from the open item lists
  3. Identifying the errors in the accounts payable
  4. Verifying the errors in the accounts payable
  5. Reclaiming liquidity

In steps 2, 3 and 4, the obtained data is actually analyzed. This is also where the root cause analysis is performed to find out where the actual problems are in the accounts payable. Then it can be seen whether these errors can be stopped and prevented in the future. This root cause analysis is performed on 3 levels:

  • At the highest level, it is generally checked whether certain departments, type of invoices or products cause many errors
  • At the middle level, within these departments, type of invoices or products, we look at where exactly the problem lies.
  • At the lowest level, the individual invoices where there is an analyzed error

Big savings often start small

Once it has been determined that a particular process problem is the cause of multiple errors in accounts payable, the root cause analysis can reveal further pain points within the organization. Because the cause of the problem, no matter how small it is, has been found, significant savings can be realized across the entire organization. It is also important to go back to the highest level when claims have been analyzed at the lowest level and the cause has been found. In this way, the root cause analysis remains a cyclical process, which ensures lasting improvement.Getting to the heart of the problem is essential in many industries. For companies in all industries, it is important to analyze why something went wrong and how it can be prevented in the future. This is fundamental to success. The same goes for Recovery Audits.

Recovery Audits have become a go-to mechanism for recovering losses that occur due to erroneous payments, undue payments and duplicate payments. But as useful as these audits are for recovering money, isn’t it better if the money had never gone away?

Through their years of experience, recovery auditors can uncover hidden factors that cause the organization to miss out on profits. By applying their proven methods, data analysis and their years of expertise, these factors can be addressed. Due to the growing ability to detect these errors in advance, a recovery audit changes from a retrospective to a proactive exercise. A root cause analysis is fundamental to this change.

How recovery audit is changing

Finance teams have always had to strike a balance between stopping the leakage of money and staying efficient. In a large company where thousands of invoices come in every month, it is practically impossible to view them all manually.

That’s why Recovery Audits became the best practice. What has changed is the speed with which Audit information can be converted into usable data. Years of experience combined with technological advancement enable our Auditors to use what they have learned, to uncover underlying issues within the financial processes. When these issues are addressed, sustainable long-term controls can be implemented to stop losses before they occur.

What is a root cause analysis?

Root cause analysis is the process of discovering the underlying leakage sources to identify the weaknesses in a process and suggesting ways to resolve them. By finding out what causes erroneous payments in the first place, the accounts payable, finance and commercial teams are in a better position to prevent them before they happen.

It is much more effective to systematically prevent and resolve invoice errors at the source, rather than constantly looking back to make up for past losses. Root cause analysis is performed using a combination of best practice methodologies, data analysis tools, and auditor expertise to identify the sources of an event or trend. It looks beyond superficial causes, such as human error, to show where processes or systems have failed, or may have caused the problem in the first place.

In a Recovery Audit, a root cause analysis has three main goals:

  1. Discover the source of every invoice error
  2. Understand how to prevent mistakes from repeating themselves
  3. Use what you learn to prevent similar mistakes from recurring in the future

Advantages of a root cause analysis

Recovery Audits use root cause analysis to design or adjust financial controls in such a way that the risk of recurring undue payments is proactively eliminated. Instead of just dealing with the symptoms of errors, the root cause analysis can focus on a specific supplier or purchase category, and suggest additional checks before approving an invoice within those parameters.

Recovery Audits are an effective way to identify past undue payments and recover losses through claims. By diagnosing the actual cause of a problem, you can cure it instead of treating the symptoms endlessly.

Where is the root cause analysis in the recovery process of SpendLab?

During a Recovery Audit, SpendLab processes a lot of data from your organization. As a result, it is fundamental that a correct standard method has been developed to perform the Recovery Audit. At SpendLab, this process looks like this:

  1. Collect open item lists from all your suppliers
  2. Analyzing the data obtained from the open item lists
  3. Identifying the errors in the accounts payable
  4. Verifying the errors in the accounts payable
  5. Reclaiming liquidity

In steps 2, 3 and 4, the obtained data is actually analyzed. This is also where the root cause analysis is performed to find out where the actual problems are in the accounts payable. Then it can be seen whether these errors can be stopped and prevented in the future. This root cause analysis is performed on 3 levels:

  • At the highest level, it is generally checked whether certain departments, type of invoices or products cause many errors
  • At the middle level, within these departments, type of invoices or products, we look at where exactly the problem lies.
  • At the lowest level, the individual invoices where there is an analyzed error

Big savings often start small

Once it has been determined that a particular process problem is the cause of multiple errors in accounts payable, the root cause analysis can reveal further pain points within the organization. Because the cause of the problem, no matter how small it is, has been found, significant savings can be realized across the entire organization. It is also important to go back to the highest level when claims have been analyzed at the lowest level and the cause has been found. In this way, the root cause analysis remains a cyclical process, which ensures lasting improvement.

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