Table Of Content(Continued from front flap) Lanza Cost
Praise for
• How the cost recovery market works Cost ReCoveRy
and which trends affect it ReCoveRy
• How to select the best possible
provider “Is your company leaking cash without even knowing it? Lanza’s easy-to-read
book gives practical points on how to increase profits with little or no added cost. C Turning Your AccounTs PAYAble
• What the cost recovery auditor does T
This is the corporate equivalent of finding money on the sidewalk; just reach u
DePArTmenT inTo A ProfiT cenTer
r
• The recovery technology used by firms down and pick it up!” n
to focus their testing efforts —Joseph T. Wells, CFE, CPA, founder and Chairman, in o
g
Association of Certified Fraud Examiners
The only book available to look holistically at the Y Now every organization can generate cash
o
cost recovery process, Cost Recovery: Turning Your “Rich pours a great deal of his extensive knowledge into this guide. It is an u s Cost recoveries, stop profit leaks, move away
r
Accounts Payable Department into a Profit Center encyclopedic approach to the hows and whys of cost recovery services. Not only A from control issues, and work toward process
makes it easier for companies to better understand does the reader learn about the basic mechanics of how cost recovery works, but c t improvements with the tools found in Cost
c
the nature of recovery firms and to start saving also has access to numerous case studies showing how it works in key areas such
o Recovery: Turning Your Accounts Payable Depart-
money...before it disappears. as payables, advertising, health benefits, leasing, and telecommunications. The u
ment into a Profit Center. Authoritatively showing
n
guide may prove to be the masterwork in this field.”
T how to incorporate profit recovery technology
s R
—Steven M. Bragg, CFO, Xedar Corporation
P ReCoveRy to achieve stellar bottom-line results, this
A
Y insightful and highly readable book provides
, “An easy action reference tool on how reduced disbursements can increase income A
RICHARD B. LANZA b e step-by-step guidance for completing a cost
is the significantly more than an equivalent rise in sales. Your ROI on this book will l
CPA, CFE, PMP, e recovery effort of any company’s spending.
President of Cash Recovery exceed any other investment!” D
C
Partners, LLC, the author —David H. Margulies, former Senior Managing Director at eP Audit technology expert Richard Lanza clearly
A
of twelve publications and, Bear Stearns, responsible for Controller’s Shared Services r
explains how to utilize free services offered by cost
over 100 articles for major Tm o recovery consultants as well as how to assess risk
“In an economy where revenue streams are constricted, using Cost Recovery
audit and accounting publications. With nearly e
techniques to find money or save money seems like an obvious strategy, but it’s n based on the company’s control issues to identify
two decades of experience in audit technology T Turning Your
perceived as a daunting task for most organizations. Rich Lanza’s Cost Recovery in the top areas of likelihood for recovery and process
and recovery auditing, he has become a leading guide provides a step-by-step process that’s feasible to implement and easy to T v improvements. This important book looks at
authority in these areas. He also provides training o
read.” cost recovery from every angle, with in-depth
courses in audit software and recovery, including A AccounTs PAYAble
—Jacqueline A. Breslauer, SVP Corporate Audit, The CIT Group Inc. P e coverage of areas including telecommunications,
forty-three speaking engagements in the last r
o utilities, healthcare, advertising, media, freight,
esaigvhe temeonn meyo tnhtrhosu. gHh et hhea su sceo nosfu ltteecdh noonl ohgoyw a ntdo “aRniaclhy sLisa tnoz tah, eth nee ‘xDt laetvae Ml. Hagiisc piaanss,’i ohnas f oerle avpaptelydi nthge d aartta oafn dalayttai crse ctoo vtehrey w aourdkitp laancde fiT c R DePAr TmenT inTo tax reduction, project fraud, and more.
recovery auditing for companies ranging in size has defined him as a pioneer in the area of cost recovery. I commend Rich for his e Filled with illustrative case studies, Cost Recovery:
n
from $30 million to $30 billion. thinking outside the box that has pushed organizations to review their approach Te y A ProfiT cenTer Turning Your Accounts Payable Department into a
r
to data recovery and cost control with the result of saving millions of dollars!” Profit Center is a time-saving road map revealing:
—Jim Kaplan, CIA, CFE, President/CEO, AuditNet.org,
The Global Resource for Auditors • Why every company should consider
recovery services
• How to overcome obstacles to
implementation of cost recovery
• The opportunities—and risks—
RiChaRd B. Lanza
involved in recovery
(Continued on back flap)
Pantone Black PMS 173 C GLOSSY
ISBN: 978-0-470-32238-3
Chapter= Date:June23,2009 Time:1:14pm
Chapter= Date:June23,2009 Time:1:14pm
AdditionalPraisefor
CostRecovery:TurningYourAccounts
PayableDepartmentinto
aProfitCenter
“In these turbulent economic times, nothing is more important than pro-
tecting your money. Rich Lanza shows you how to put proven theory into
practice. This book on cost recovery will save you time and money.”
—Dave Coderre
President, CAATS
“Internal control professionals can glean practical insights on cost recovery
from Rich’s book and gain valuable insights into best internal control prac-
tices. Industry, government, and education evaluators can convert vendor
overcharges into cash: employee benefits, freight, leases, service agree-
ments, and much more ... Alas, a detective control that turns auditing into
a profit center!”
—Bob Benoit, President, Lord & Benoit
SOX Compliance and Member of COSO Taskforce
“Cost Recovery: Turning Your Accounts Payable Department into a Profit
Center is a valuable resource in any economic environment, industry, or
organization. Whether you’re part of a large, multinational corporation, or
a relatively small company with one location, the broad range of topics
covered ensures that you will find something useful in this book.”
—Ronald T. Altomare
Director, Internal Audit and System’s Control
Barnes & Noble College Booksellers
“Cost Recovery: Turning Your Accounts Payable Department into a Profit
Center is an interesting, accessible introduction to one of the most over-
looked areas of corporate governance. Filled with real-life case studies and
theactualnamesofRecoveryFirmsfromvariousandsometimesunexpected
industries,thebookrevealsthepowerofnotonlyrecoveringmaterialfunds
fromhistoricaltransactionsbutreapingfuturecostsavingsfrom‘closingthe
gaps’aswell.Thisisamustreadforanyoneinvolvedinbusinessplanning,
particularly procurement and internal audit.”
—James N. Bean
Partner, Advertising Audit & Risk Management
Chapter= Date:June23,2009 Time:1:14pm
Chapter= Date:June23,2009 Time:1:14pm
Cost Recovery
Turning Your Accounts Payable
Department into a Profit Center
RICHARD B. LANZA
JohnWiley&Sons,Inc.
Chapter= Date:June23,2009 Time:1:14pm
Copyright©2009byJohnWiley&Sons,Inc.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
PublishedsimultaneouslyinCanada.
Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,or
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LibraryofCongressCataloging-in-PublicationData:
Lanza,RichardB.
Costrecovery:turningyouraccountspayabledepartmentintoaprofitcenter/
RichardB.Lanza.
p.cm.
Includesindex.
ISBN978-0-470-32238-3(cloth)
1.Costcenters(Accounting)I.Title.
HF5686.C8L2672009
658.15(cid:2)53—dc22 2009008540
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
Chapter= Date:July2,2009 Time:5:20pm
Contents
AbouttheAuthor xiii
Foreword xv
Preface xvii
Acknowledgments xxi
HowtoUseThisBook xxiii
CHAPTER1 Benefits of Recovery Services 1
U.S. General Accounting Office Report “Recommends”
Recovery Auditing 1
Top Benefits of Cost Recovery 2
Top Reasons for Recovery 4
Recovery Estimates—Embrace the Uncertainty 5
When Recovery Becomes Fraud 6
Sarbanes-Oxley Implications 9
CHAPTER2 Overcoming Obstacles to Getting Recovery Started 15
Overcoming Obstacles to a “No Brainer” Service 15
Why Internal Audit Department Are Sometimes the
Worst Resource for Doing Recovery Audits 19
Why Internal Audit Departments Are Truly the Best
Resource for Doing Recovery Audits 20
Why Select a Provider for Your First Audit 23
CHAPTER3 Assessing Opportunities and Risk 25
Focusing on the Largest Fish 25
v
Chapter= Date:July2,2009 Time:5:20pm
vi Contents
Scattergraphing: A Powerful Tool to Identify
Changes in Company Activity 27
Going Deeper and Data Auditing Vendor Accounts 30
Using Vendor Toolsets 33
The Top 10 Questions to Ask When Deciding to Do
a Recovery Audit 33
CHAPTER4 The Overall Cost Recovery Marketplace 36
How the Industry Worked in the Past 36
Recovery Consulting Today 37
The Evolving and Continuous Recovery Process
at Companies 38
Why Recovery Consulting Is so Popular 39
Dimensions of Recovery 41
Recovery Categories 44
How the Recovery Areas Are Defined
in This Book 47
CHAPTER5 Accounts Payable and Procurement 49
Case Study 5.1: American Auto Runs a Tight Ship 49
Case Study 5.2: Public Utility with Staffing Problems 51
Case Study 5.3: Contract Compliance with Pinpoint
Profit Recovery Services, Inc. 53
Case Study 5.4: International Personal Goods
Manufacturer with Retail Outlets 54
Case Study Wrap-Up 56
Recoveries to Find 58
Questions to Ask When Assessing the Opportunity 59
Conclusion 62
CHAPTER6 Advertising Agency Audits and Media Reviews 63
Overview 63
Case Study 6.1: Reluctant Marketing Department Hiding
Its Intentional Agency Benefit 63
Case Study 6.2: Exit Audit after an Agency Transition 64
Chapter= Date:July2,2009 Time:5:20pm
Contents vii
Case Study 6.3: Media Management 65
Case Study 6.4: Global Software Company 66
Case Study Wrap-Up 67
Recoveries to Find 71
Prioritizing the Opportunity 73
Conclusion 74
CHAPTER7 Audit Firm Benchmarking 76
Overview 76
Case Study 7.1: An Auditor in Trouble? 77
Case Study 7.2: Utility Service Firm Paying too Much 81
Case Study Wrap-Up 84
Recoveries to Find 87
Questions to Ask 87
Conclusion 87
CHAPTER8 Escheatment (Unclaimed Property) 88
Overview 88
Case Study 8.1: Accounts Receivable Overcrediting 92
Case Study 8.2: Pinpoint Profit Recovery Assists Large
Services Corporation 93
Case Study Wrap-Up and Recoveries to Find 96
Questions to Ask When Assessing the Opportunity 99
Conclusion 100
CHAPTER9 Freight Bill Auditing 101
Overview 101
Case Study 9.1: When Freight Classes and
Descriptions Make a Difference 102
Case Study 9.2: Aluminum Manufacturer and
Distributor Post-Audit 102
Case Study Wrap-Up 102
Recoveries to Find 107
Questions to Ask 108
Conclusion 108
Chapter= Date:July2,2009 Time:5:20pm
viii Contents
CHAPTER10 Health Benefits Auditing 109
Overview 109
Case Study 10.1: Midwest Municipality Cuts Costs 111
Case Study 10.2: Employer Takes Control 114
Case Study 10.3: Holding Company Uses Comparison
to Advantage 116
Case Study Wrap-Up 117
Recoveries to Find 121
Questions to Ask 122
Conclusion 123
CHAPTER11 Lease Audits 124
Overview 124
Case Study 11.1: The Portfolio Assessment of a
National Consulting Firm 125
Case Study 11.2: Variety of Issues at a National
Banking Corporation 126
Case Study 11.3: Park Avenue, New York City, with
Inappropriate Cleaning and Utility Costs 127
Case Study 11.4: Multinational Corporation Audits
One Lease for Big Savings 129
Case Study Wrap-Up 130
Recoveries to Find 133
Questions to Ask When Assessing the Opportunity 134
Conclusion 135
CHAPTER12 Order to Cash Reviews 136
Overview 136
Case Study 12.1: Construction Materials Not Reporting
All Cement Loads or Pricing Them Properly 136
Case Study 12.2: Too Many (Fraudulent) Fourth-
Quarter Sales 138
Case Study Wrap-Up 139
Recoveries to Find 141
Questions to Ask When Assessing the Opportunity 143
Conclusion 148
