As we make our way into 2022, the world is certainly different as we emerge from the pandemic that has gripped the world for two years. The outlook is not promising, but according to Deloitte’s 2022 Retail Industry Outlook, there are opportunities available. It could be considered a reset if retailers restructure supply chains, rightsize inventory management, and reinvent their online/offline strategies to shape themselves for a new future.
With this in mind, let’s take a look at some of the best practices for effective procure-to-pay risk management.
Fortify Your Controls
When it comes to effective protection from supplier risks, it’s clear that current accounting system checks and audits are not enough. There is now a vast array of options when it comes to receiving invoices, streamlining processing, and making payments – all of which can exploit known weaknesses in existing controls.
And when you consider that in the last year, retailers’ supplier spend increased by 30% on average, and the number of invoices increased by 46%, this highlights the importance of continuous forensic auditing to tighten controls and reduce risk.
Improve Fraud Prevention
There are many concerns and considerations to make when it comes to fraud prevention. It has been a volatile time in recent months and years, which means that fraudsters are taking a more sophisticated approach. Furthermore, as businesses look to automate processes, it means that the human element of identifying supplier and transaction details is reduced or completely removed. What this means is that finance teams need to alter their approach to fraud protection.
Furthermore, it has been identified that up to 70% of suppliers are not used regularly, which increases the risk of fraud, while 56% of invoices received still don’t contain a PO number. This clearly indicates the importance of forensic analysis of all supplier and transaction data as this gives accounts payable and procurement teams, along with internal and external auditors, a strong fraud prevention strategy.
Recovering Cash
It is vital that businesses maintain adequate controls on working capital and cashflow, enabling them to pay suppliers correctly. However, many businesses do not have the right controls in place which results in duplicate and incorrect invoices and high-risk suppliers being paid, often for years before detection.
However, with FISCAL’s solution, it’s possible to undertake a one-off historical recovery audit, with the same software then performing ongoing detection of risks to avoid future overpayments. In fact, FISCAL has helped retailers to prevent as much as £11.9 million in incorrect payments, with over £1 million recovered from suppliers. This proves the importance of finding, identifying, and preventing financial losses through ongoing monitoring.
Monitoring Spend Performance
Finance teams have to change their approach when it comes to meeting payment targets and protecting working capital. To achieve this, ongoing, continuous forensic analysis makes it possible for finance teams to adopt a strategic advisor mindset.
This means that it is important that they monitor spend performance through proactive analysis of procure-to-pay data. For example, through FISCAL’s solution, it was found that the entered-to-paid time can be halved, and the one-time supplier count reduced by 46% – both reducing operating costs and reducing fraud risks.
By adopting these best practices it is possible to reduce risks and operating costs when it comes to procurement-to-pay processing. Adopting the best practices can help to implement long-term risk management that proves highly effective.
<Click here to download the full report on protecting financial operations in retail>
