Background
Post-audit recovery-- the detection of payment errors in purchasing transactions-- is the direct result of the voluminous and complex nature of trade promotions. The magnitude of this activity is significant. It was estimated in one study that consumer goods trade promotion spending topped $100B (16.9% of sales) in 2002. Of this, over $10B was taken as deductions, with a growth trend of at least 20% per annum-- outpacing the top line growth rate of most companies. But while dollar magnitude is growing, it is not the only factor of import. There is also tremendous pressure on retailers and vendors to accurately report financial performance, further exacerbated by the scrutiny of Sarbanes-Oxley legislation. And lingering, arcane post-audit practices (such as one that leads to vendors rejecting undocumented deductions) lead to frustration and anger. Consequently, there is an erosion of relationship satisfaction among trading partners—a trend that is driving significant and urgent need for change in the post audit arena.
Executive Abstract
Post-audit recovery (or recovery auditing) has been prevalent in the retail industry for three decades; however this report is the first best practices study on the subject. It includes the findings of an empirical study on the prevalence of practices in post-audit recovery and their consequent effect on overall retailer-vendor relationships. The report identifies best practices linked to efficiency and effectiveness and thus lays the foundation for developing industry standards in post-audit recovery. This study, conducted over an 18 month period, was based on extensive collaboration and research discussions between academics and managers from leading US retail and manufacturing companies. The distinctive mix of academic rigor and practitioner relevance is the hallmark of this report... |
