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Supplier Expense Management

There are three basic types of audits which should be performed on a routine basis to ensure the services your company is procuring from your suppliers are invoiced at the contracted rates:

• Rate Audits

• Unit Audits

• Reconstruction (Rate Application) Audits

Let’s take a brief look at what’s important in each of these areas:

Rate Audits

Several questions are addressed in Rate Audits: Are the applicable service types being invoiced?  Are the applicable rates being invoiced?  Do the invoiced rates match the tariffed / contracted rates?  A thorough rate audit will:

• Examine ICAs/tariffs to ensure that produce the applicable rate elements and rates

• Check revenue and cost rate tables to ensure they are configured by service type, by rate element, for the relevant geography and time period

Unit Audits

This audit answers the question: Do the invoiced circuits, minutes, calls and service order charges match what is actually in service or what was installed/changed/disconnected during the month?  An excellent Unit Audit will:

• Audit inventory to establish the current active units, by service type (MRCs)

• Check usage processing to ensure call and minute data are summarized into usage types with corresponding characteristics to ensure valid usage units and charges

• Examine provisioning processing to verify the changes to the inventory, by service type (NRCs)

Reconstruction (Rate Application) Audits

Here the key thing to probe is: Was the applicable rate applied to the service unit appropriately (e.g. no duplicates or omissions)?  The Reconstruction Audit will perform the following:

• Reconstruct invoices independently to ensure applicable rates are applied to each service unit, replicating invoicing for each service type.

• Compare reconstructed charges to actual invoices.  The variances will identify overbilling or under-billing situations for either revenue or cost recovery.

Conclusion

These audits should be performed for monthly recurring charges (MRCs), usage charges, and non-recurring charges (NRCs), and other charges and credits (OCCs).

If your company does not currently audit supplier expense on a routine basis, consider a three-month audit to determine cost recovery opportunity.  Call us to for your supplier expense health check.