Is 0.1% of YOUR Spend Expensive?

24 January 2018

For many businesses, it is tough to reduce costs. A high proportion are "fixed" and in many an even higher proportion are committed or would cost money to avoid/reduce.

Imagine then, if £1 in every £1000 you spent was a duplicate payment. 0.1% of total purchases...a complete waste of money. Suppliers may not always spot this, and those that do may not be booking the overpayment to your account - assuming that they even run a specific ledger account for you... and those that do book it to your account may have stopped sending you statements to save themselves money.

Well, if you do not insist on statements of account, and even for those you who do get them but do not reconcile them to your purchase (or bought) ledger, research shows that £1 in every £1000 is a duplicate payment.

Reconciling supplier statements is a solid control. It detects invoices posted twice, invoices posted to the wrong supplier, it detects invoices that the supplier has credited but not sent (or you have not processed a credit note for) or invoices that the supplier has forgotten to process. All these present saving opportunities.

As well as the direct savings, picking up unpaid bills that suppliers are overdue will avoid costly disruptions to supplies and unnecessary legal and recovery costs. It may even help you take advantage of early settlement discounts....

There is free money out there and if you are not making sure that your purchase ledger is complete and accurate, instead of you being the beneficiary, you are likely to be the benefactor.

Just saying... working capital management – it is common sense really.

For more information, contact Jim Muir (consulting@aab.uk) of the AAB Consulting Associate Network, or your usual AAB contact.

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