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Error Prevention: Why Recovery Audit Isn’t Enough in the Retail Industry

Recovery Audit in the Retail Industry: The Traditional Way

Traditionally, retailers have relied on third-party recovery auditors to recover the funds they’ve wrongly lost from instances such as promotions, rebates, and incorrect pricing. And while it’s great to get that money back, there’s a larger issue at hand: when you rely on a recovery audit to correct your transactions, you’re already set up to lose. Many retailers don’t realize just how much money they could save upfront, rather than waiting to recover it AFTER it’s been lost.


Why isn't a recovery audit enough in the retail industry?

The retail landscape is complex and only getting more complicated. New channels, promotional activities, and data management technology make it challenging to keep track of their payments …meaning they’re prone to payment errors.

Once that money's gone, it’s MUCH harder to get it back - because of roadblocks like:

  • Vendor nonresponse

  • Issues with error identification

  • Extensive payment plans

  • Payments aging out of agreement terms (outside contracted time period to recover)

  • Merchandising turnover

  • Lack of clarity around supplier agreement intent

  • Potential impact to current year funding

  • Supplier relationship friction

Cost price error prevention saved one FlexTecs client over $1.1M in product cost overpayments. How? The client and supplier had negotiated new lower costs, but both parties missed the admin to update the system costs. Luckily, FlexTecs was able to fix the client’s cost portal BEFORE they had paid the orders and invoices. Without prevention, the client would have drastically overpaid and delayed post-audit recoveries.

Retail moves fast – there’s no time for retailers to waste in recovering from erroneous payments, even if that’s what they’re used to. Find out how accelerated recovery can help retailers save time, money and critical relationships with suppliers in our blog, “How Retailers Can Mitigate the Impact of Inflation with Accelerated Recovery” >


What is Error Prevention in Retail Recovery Audit?

Whereas traditional recovery audits are reactive in nature, error prevention stops the money from leaving retailers’ pockets in the first place. That means retailers don’t have to chase suppliers down in hopes they’ll return the money they were never supposed to get in the first place. It means retailers won’t have to wait months, or even years to gain a clear view of their transaction data. It means they can proactively and completely STOP erroneous payments from being sent out.

Looking to improve margins, internal payment processes, supplier relationships, and payment accuracy? We have just the solution for you. Learn about the benefits of prevention and acceleration in the recovery audit process in our blog, “The Power of Acceleration and Prevention in the Recovery Audit Process” >


Benefits of Error Prevention Instead of Recovery Audit in the Retail Industry

“If it ain’t broke, don’t fix it” is a phrase that applies to a lot of things, but very rarely does it apply to the world of finance. Recovery audit alone is an adequate solution to eventually retrieve some lost cash…but not all of it, and not very quickly.

On the other hand, error prevention upfront is a proactive solution that saves money from being wrongfully paid in the first place. Retailers can improve profit margins and cash flow, refine internal processes, and strengthen vendor relationships by stopping payment errors at the source – before they escalate to a pressing issue that needs to be resolved.

Save time, resources, and manpower → Think about how much time and bandwidth it takes from you, your team, your suppliers, and your recovery audit partner to review and reconcile payment errors. By preventing those errors upfront, the lift needed from retailers is significantly decreased. Instead of spending all of your time cleaning up after payment errors, you can focus on what really matters, like improving retail margins.

Cash retention within payment terms → Holding onto your cash NOW means you don’t have to work so hard to get it back LATER. Over time, suppliers are less likely to return the money they’ve wrongfully been paid. It’s not necessarily malicious – pricing, rebates, and promotional funding are often complex and difficult to remedy with precision. Additionally, payment errors can occur when the intent of agreements is unclear; 1-2 years after a transaction, it becomes extremely challenging to reconcile or come to an agreement surrounding that intent. Regardless, the money never should have ended up in their hands to begin with – and if it hadn’t, you wouldn’t have to do any work to get it back.

Refinement of internal processes → Continuous error prevention helps retailers uncover flaws and gaps in internal processes, such as payment errors, contractual mistakes, or friction in operations that are slowing retailers down or holding them back.

A common solution to misplaced funds is that suppliers will pay the money back through a payment plan – and that can get timely, costly, and inconvenient very quickly. If a vendor is paying you back hundreds of thousands of dollars over the span of several months, just think about the time value of that money. Receiving it in bits and pieces over an extended period of time can hurt your financial reporting and cash flow with every passing minute.

Spend less on recovery audits → When you prevent more errors upfront, you can hold onto the money you would’ve otherwise spent recovering from them. Because accidents will always happen in the complex retail landscape, recovery will always remain a useful mechanism for the remediation of those errors. However, recovery should be a last resort that helps retailers tie up any loose ends – not the backbone of their financial security.

There are so many moving parts in the average retail enterprise, from inventory to rebates to nuances between suppliers. Find out how to maximize findings in recovery audits and enhance internal payment processes in our blog, “Retail Best Practices for an Effective Recovery Audit” >


Achieve Error Prevention in Retail Recovery Audit

Error prevention can be achieved through tools that alert retailers based on their unique environment, technology, and payment data – NOT tech that falsely alerts them about every little thing.

Retail is a fast-moving, often unpredictable industry with such great and variable cash flow. Protecting margins is crucial for the survival and growth of today’s evolving retailers. Is the hope that you can maybe, possibly recover money that your business relies on - usually pretty significant amounts of money - promising enough to let it get out the door in the first place?

Establishing a contract compliance audit program can help companies foster a culture of compliance and payment accuracy. Discover how in our guide, “The Ultimate Guide to a Contract Compliance Audit” >


How FlexTecs Can Help

Traditional recovery audit practices weren’t built for the wealth of data and fast-paced environment that defines retail today. That’s why FlexTecs does it differently.

With preventative technology and internal optimization, we believe that retailers shouldn’t have to wait for the damage of incorrect payments before safeguarding their margins. Our philosophy is “prevent what you can, accelerate the recovery of what you can’t”...so retailers can reap the benefits of payment accuracy, quicker recovery periods, improved supplier relationships, and painless P2P processes.

Ready to prevent payment errors and bolster your retail margins? Get in touch with our team now.