Connect with us

Top Stories

One time vs. Ongoing Audit – What is right for your organization?

Published

on

One time vs. Ongoing Audit – What is right for your organization?

By Sharon Watkins, CEO of RadiusPoint

There are many questions that come up when considering a one time audit on your telecom or utility invoices versus an ongoing monthly audit.

After years of research, hands on experience, and daily Client interactions, the ongoing audit would most often be more beneficial to an organization.

  • Would you rather have overcharges refunded to you each month or would you rather wait for 2 years or more to have an overcharge refunded to your company?
  • How much money are you leaving on the table for taxes and interest when you are waiting 2 years or more for an overcharge to be refunded to your company?
  • Are the telecom vendors really only giving back 6 months or less of an overcharge found in their favor?
  • Are there really that many overcharges identified during the one time or ongoing audit? Is it worth all of the time involved in gathering invoices?
  • When you use an Expense Management company, do you relinquish all of your control over the invoices?
  • Have your Telecom vendors reduced their refund policy for erroneous charges to 6 months or less?

One time vs. Ongoing Audit – What is right for your organization? 3These are just some of the questions that arise when contemplating a one time audit or the use of an Expense Management company to manage the telecom, wireless and utility invoices and services. Many organizations plan to have their telecom or utility invoices audited every 2 years.  Would it be more advantageous to have that audit monthly and recoup your overcharges each month instead of having your vendors play with your money over that two year period?

There are many things to consider when starting the process of the telecom or utility audit.  If the services are being sent out for a Request for Proposal (RFP), there are certain time consuming tasks you must consider.  These tasks would have to be completed every two years, even if you hire the same audit firm each year:

  • Time to create the RFP
  • Time to evaluate the RFP
  • Expertise to evaluate the different service offerings, i.e. level of service – surface audit or in-depth audit
  • Time involved with vendor meetings
  • Contract negotiations
  • Gathering 2 years of invoice copies
  • Gathering vendor contracts
  • Gathering other needed documentation for auditors
  • Answering questions from auditors regarding the environment, services and locations

The gathering of the documents and time involved in the RFP process may sap your team of time that they need to perform their daily tasks and for some organizations, the time constraints are the biggest obstacle in getting the audit on the schedule.  Maybe it would be easier for the auditor or an Expense Management company to get the invoices on a monthly basis.  But how would they be compensated for this extra work?

An Expense Management company for telecom, wireless or utility invoices would be receiving your invoices monthly as a part of their services to manage the full lifecycle of the invoices, from receipt to payment.  If this vendor is already processing your invoices and allocating the charges on a monthly basis, performing a monthly audit is the next logical step in managing the expenses.

The financial arrangements vary with the audit firms that are hired to perform the one time audit.   Knowing what type of arrangement that you are signing on for is imperative as a complete and thorough understanding will eliminate any confusion on cost.   While it may be appealing to hire a firm on a contingency basis, i.e. they only share in what is found, just know that with this type of arrangement, there can be many pitfalls that will ensure that you are not getting a full and complete audit.

Some of the issues of a contingency based audit are:

  • Typically only identifies low hanging fruit
  • A full inventory of all services and cost is NOT completed
  • There is a charge for savings identified, not realized
  • A Cost Avoided charge applies to any overcharges identified or optimization recommendations whether they are implemented or not.
  • Your team must identify every issue that has already been reported to the vendor before the work starts, or the audit firm will be able to take credit for any refunds or Costs Avoided.

What is involved when your audit firm only identifies the low hanging fruit?   This most often involves very simple contract issues and third party charges that are on your local service invoices.   This type of surface audit involves your audit firm providing a report of your overcharges or refunds without providing a complete inventory of your services, i.e. every phone number or circuit number identified with the physical address, all monthly charges detailed and the use of the service.

When do the Cost Avoided charges come in to play and how are these calculated?  Most of the Contingency Audit firms expect to be paid on Cost Avoided for a specific period of time.  This would involve the audit firm identifying a phone line that is no longer in use, making a recommendation to cancel the line and then calculating a Cost Avoided for a 12 or 24 month period.   This may or may not involve the audit firm actually canceling the line, so it is imperative that you know who will be responsible for ending the services so that your organization will actually realize the savings.

The example below outlines what a Contingency based audit would charge.

Refunds Identified Example of Error Monthly Fee in error Refund Achieved Payment to Audit Firm
35% of One time credit Long Distance plan erroneously placed on local service invoice $100.00 $600.00 $210.00 ($600.00 x 35%)

Possible loss of 18 months of overcharges $1,800.00 due to vendor refund restrictions

35% of One time credit Contract error on MPLS services $52,000.00 $312,000.00 $109,200.00 ($312,000.00 x 35%)Possible loss of 18 months of overcharges $936,000.00 due to vendor refund restrictions

Note the Refund Achieved – this involves a 6 month refund without any interest or taxes being provided as a refund by the vendor.   Telecom and Utility vendors differ in their refund policy and over the past 4 years have shortened their refund time to six (6) months or less.   Many of the vendors have a one (1) month refund policy that has to be fought against by the audit firm just to retrieve monies overpaid by the Client.

Optimization Cost Savings Example of Recommendation Monthly Fee (includes taxes and fees) Cost Avoided Payment to Audit Firm
35% of Cost Avoided calculated for a 12 month period Remove phone line that is no longer needed $85.00 $1,020.00 ($85.00 x 12 months) $357.00 ($1,020.00 x 35%)

 

35% of Cost Avoided calculated for a 12 month period Implement EFax technology to eliminate fax lines at 100 locations $8,500.00 $102,000.00 ($8,500.00 x 12 months) $35,700.00 ($102,000.00 x 35%)

So would it be better to have this identification or errors and possible Cost Avoidance as a part of an ongoing monthly audit for all of your telecom and utility invoices?

Let’s explore the pros and cons of each service.

Pros and Cons of One Time audit

Pro Con
Refund sharing – no fee until an error is identified Cherry Picking or surface errors are found; no deep dive into services
Cost Avoided sharing – No fee until a fee is identified as avoidable or a service is optimized Possible dispute over who found the Cost to avoid or who optimized the services

Could result in having to move to a different vendor = additional cost

Could be a requirement whether the change is made or not

Refunds identified as errors can be retroactively claimed for up to 6 months; could be +/- months depending on vendor The error could have occurred the entire 2 years but the vendor only allows for a credit equal to a fraction of the overcharge

The larger dollar amount of the error, the longer the vendor will take to provide the refund, could take months to recover your overcharges

Dealing with audit firm only once every 2 years Time spent in gathering invoices, contracts and other needed information every 2 years

Pros and Cons of Ongoing Audit through Expense Management

Pro Con
Eliminates the Accounts Payable tasks for receipt to payment of invoices Monthly fee for lifecycle management; receipt to payment of invoice
Eliminates paper invoice handling by organization; Imaging performed by Expense Management company Perceived loss of control of invoices
Elimination of error proactively on a monthly basis through monthly audit of invoice Addition of Expense Management company working with the organizations vendors
No refund sharing/Errors are identified monthly through audit

 

No Cost Avoidance fees/Detailed monthly processing allows for optimization monthly

Hiring an Expense Management company to manage the lifecycle of your telecom, wireless and utility invoices may make more sense, if your company has more than 50 locations, multiple wireless users, has had or plans to have acquisitions or divestitures or if there are staffing constraints.   An Expense Management firm can offer the following services that can augment your current staff, bringing soft dollar savings to your bottom line, as well as, identifying errors or optimization that will result in hard dollar savings.

Invoice Processing                                                          Expense Allocation

Invoice Payment                                                              Invoice Imaging

Contract Management                                                  Reporting at the Cost Center or Location Level

Reporting at the End user level                                 Interface with Accounting Software

How would your organization be affected if you hired an Expense Management company to manage the full lifecycle of your invoices on a monthly basis that included a monthly audit instead of hiring a firm to provide a one time audit?

In the example below, the assumption will be made that the organization has $3MM annual expenses to be managed and the refunds and Cost Avoided in the above Contingency Audit example were identified during the one time audit.

One time Audit Components Annual cost/expense
Cost of Accounts Payable daily tasks in processing the invoices $97,128.00
Hard Dollar Savings for Refund identified and recovered in the one time audit – Paid to Audit Firm $210.00 + $109,200.00 = $109,410.00
Hard Dollar Savings for Cost Avoided in the one time audit – Paid to Audit Firm $357.00  + $35,700.00= $36,057.00
Total for 12 month period (excludes time involved to create and run RFP process) $242,595.00

Annual Cost for Expense Management firm in above example: $42,000.00

Savings to utilize an Expense Management firm: $200,595.00

The savings would have to be viewed in a couple of ways due to the refund and Cost Avoided differences in the one time audit and the ongoing audit.  The ongoing audit will allow for an immediate refund or Cost Avoided, eliminating the ongoing overpayment of an error for a 24 month period.  The one time audit will most likely leave 18 months’ worth of overpayment that cannot be recovered due to the vendor’s dispute and refund policies.  In this example, the loss was equal to over $900,000.00 because the audit firm could not get the vendor to refund the entire 24 months of erroneous billing.

So what makes more sense for your organization?  Managing your invoices monthly and using an outside firm to audit every 2 years or having monthly assistance with the full lifecycle management of your telecom, wireless and utility invoices coupled with a monthly audit?

Top Stories

UK’s Sunak to build bridge to recovery with more spending

Published

on

UK's Sunak to build bridge to recovery with more spending 4

By William Schomberg

LONDON (Reuters) – British finance minister Rishi Sunak will next week promise yet more spending to prop up the economy during what he hopes will be the last phase of lockdown, but he will also probably signal tax rises ahead to plug the huge hole in the public finances.

Sunak, who is due to announce a new budget plan on March 3, has already racked up more than 280 billion pounds ($397 billion) in coronavirus spending and tax cuts, pushing Britain’s borrowing to a peacetime record.

Prime Minister Boris Johnson plans to lift England’s current lockdown entirely only in late June so Sunak is expected to rely heavily on the debt markets again.

His job retention scheme, paying 80% of employees’ wages, will probably be extended beyond a scheduled April 30 expiry date, further inflating its estimated cost of 70 billion pounds. Support for the self-employed looks set to stay too.

Businesses are demanding Sunak keep other lifelines, such as exempting the firms hardest hit by the lockdown from property taxes and giving them a value-added tax cut.

And calls are growing for an extension of a 20 pounds-a-week emergency welfare increase due to expire in April.

The Times newspaper said Sunak would prolong his stamp duty property tax break for three months until the end of June.

Sunak hopes that by then Britain will be emerging from its deep freeze thanks to Europe’s fastest vaccination programme.

Bank of England Chief Economist Andy Haldane likens the economy to a “coiled spring” primed with the savings that households have built up after being stuck at home.

A strong recovery would mean a jump in tax revenues, doing some of the Treasury’s job of fixing the public finances.

Rupert Harrison, an aide to former finance minister George Osborne, said Sunak should not try to slash Britain’s 2.1 trillion-pound debt mountain, equivalent to 98% of GDP – a ratio unthinkable for decades.

Instead he should write new budget rules tied to the cost of debt servicing, which is close to record lows.

“We can safely carry higher levels of debt than before,” Harrison told a webinar organised by Onward, a think-tank.

But the scale of Britain’s borrowing is raising questions about how long Sunak and Johnson can stick to their promises not to raise key taxes, made to voters before the 2019 election.

BROKEN PROMISES?

The huge costs of tackling the worst of the coronavirus pandemic are likely to ease in the months ahead, meaning this year’s 400 billion pound budget deficit should narrow.

But Britain is probably on course to be stuck with a gap of 60 billion pounds between revenues and day-to-day spending by the mid-2020s, the Institute for Fiscal Studies think-tank says.

In a nod to that, Sunak is expected to start raising Britain’s low corporation tax rate.

The Sunday Times said the rate would rise steadily to bring in an extra 12 billion pounds a year by the time of the next election, due in 2024.

Other options include ending a freeze on fuel duty increases which has been in place since 2012 and looks at odds with Britain’s plans to be carbon net zero by 2050.

But higher fuel prices now would hurt the haulage industry, already struggling with Brexit-related disruption, and could alienate working-class voters who backed Johnson in 2019.

Higher capital gains tax or lower pension incentives would anger lawmakers in Johnson’s Conservative Party.

David Gauke, a former deputy finance minister, said the only big revenue-raising options were the ones that Johnson has promised not to touch – income tax, VAT and national insurance contributions.

“In the end, they are going to have to say, sorry we just can’t responsibly maintain that manifesto commitment,” Gauke told the Onward webinar.

($1 = 0.7046 pounds)

(Writing by William Schomberg; Editing by Catherine Evans)

 

Continue Reading

Top Stories

Women inch towards equal legal rights despite COVID-19 risks, World Bank says

Published

on

Women inch towards equal legal rights despite COVID-19 risks, World Bank says 5

By Sonia Elks

(Thomson Reuters Foundation) – Women gained legal rights in nearly 30 countries last year despite disruption due to COVID-19, but governments must do more to ease the disproportionate burden shouldered by women during the pandemic, the World Bank said on Tuesday.

Nations should prioritise gender equality in economic recovery efforts, the bank said, warning that progress on equal rights was threatened by heavier job losses in female-dominated sectors, increased childcare and a surge in domestic violence.

“This pandemic has exacerbated existing inequalities that disadvantage girls and women,” David Malpass, World Bank Group president, said in a statement accompanying the annual “Women, Business and the Law” report.

“Women should have the same access to finance and the same rights to inheritance as men and must be at the centre of our efforts toward an inclusive and resilient recovery from the COVID-19 pandemic.”

A total of 27 countries reformed laws or regulations to give women more economic equality with men in 2019-20, said the report, which grades 190 nations on laws and regulations that affect women’s economic opportunities.

While countries in all of the world’s regions made improvements in the new index – with most reforms addressing pay and parenthood, women on average still have only about three quarters of the rights granted to men, the report found.

Notably, nearly 40 countries brought in extra benefit or leave policies to help employees balance their jobs with the extra childcare needs created by coronavirus restrictions.

But such measures were “few and far between” worldwide and will probably not go far enough to tackle the “motherhood penalty” many women face in the workplace, it said.

The report also noted separate data from a United Nations tool tracking gender-sensitive pandemic responses which found 70% of such measures addressed violence, with just 10% targeting women’s economic security.

The pandemic could result in “a backslide on various hard-won advances in women’s rights achieved in recent years”, said Antonia Kirkland, the global lead on legal equality at women’s rights organisation Equality Now.

“This disruption is a unique opportunity for countries to rebuild more resilient, inclusive and prosperous economies,” she told the Thomson Reuters Foundation by email.

“But this can only be achieved alongside the removal of sex discriminatory laws that prevent women from participating fully and equally in economic, social and family life.”

(Reporting by Sonia Elks @soniaelks; Editing by Helen Popper. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

Continue Reading

Top Stories

Digital health checks vital to travel recovery, Heathrow says

Published

on

Digital health checks vital to travel recovery, Heathrow says 6

By Sarah Young

LONDON (Reuters) – Digital health checks will be vital to a recovery in foreign travel from the COVID-19 pandemic, Britain’s Heathrow airport said on Wednesday, after a collapse in passenger numbers saw it plunge to a 2 billion pound ($2.8 billion) loss last year.

The UK government said on Monday trips abroad could restart in mid-May as its vaccination campaign kicks in, sparking a surge in holiday bookings.

It is also looking into a digital health passport or app to help ease restrictions, while conceding the benefits have to be weighed against potential risks to civil liberties.

But Heathrow chief executive John Holland-Kaye said digital technology, and international agreements, would be vital to reviving a travel industry on its knees.

“It’s absolutely critical and that’s one of the main things that government needs to work on,” he said, when asked about a digital health app.

At present, paper checks on COVID-19 test results and passenger locator forms take 20 minutes per traveller at Heathrow, making travel near impossible should passenger numbers rise from current low levels.

Britain’s biggest airport said it was “very likely” people would be able to go on their summer holidays, but expects passenger numbers will take time to recover.

The airport, west of London, is forecasting 25 million passengers in the second half of the year, meaning it would be operating at about 50% capacity.

Heathrow, owned by Spain’s Ferrovial, the Qatar Investment Authority, China Investment Corp and others, last year lost its title as Europe’s busiest airport to Paris after its flight schedules shrank more than those of its rivals.

Passenger numbers plunged 73% to 22 million people last year, with half of those travelling during January and February, before the pandemic shut down global travel in March.

Heathrow said it had 3.9 billion pounds of liquidity, giving it sufficient resources to keep going with low levels of traffic until 2023, despite the 2 billion loss before tax for 2020.

The airport urged the government to provide business tax breaks for big airports, something only available to smaller airports so far, and to extend the furlough job support scheme to help it financially before the recovery takes off.

($1 = 0.7044 pounds)

(Reporting by Sarah Young. Editing by James Davey and Mark Potter)

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2021
2021 Awards now open. Click Here to Nominate

Latest Articles

Vodafone's towers arm plans biggest European IPO of 2021 so far 7 Vodafone's towers arm plans biggest European IPO of 2021 so far 8
Investing30 mins ago

Vodafone’s towers arm plans biggest European IPO of 2021 so far

By Paul Sandle and Arno Schuetze LONDON/FRANKFURT (Reuters) – Vantage Towers, the mobile masts company spun out of Vodafone Group,...

UK's Sunak to build bridge to recovery with more spending 9 UK's Sunak to build bridge to recovery with more spending 10
Top Stories30 mins ago

UK’s Sunak to build bridge to recovery with more spending

By William Schomberg LONDON (Reuters) – British finance minister Rishi Sunak will next week promise yet more spending to prop...

Oil rises despite surprise U.S. stock build weighs 11 Oil rises despite surprise U.S. stock build weighs 12
Investing31 mins ago

Oil rises despite surprise U.S. stock build weighs

By Ahmad Ghaddar LONDON (Reuters) – Oil prices firmed on Wednesday amid continued outages in the United States and a...

Sterling touches $1.42, hits highest vs euro in a year 13 Sterling touches $1.42, hits highest vs euro in a year 14
Trading32 mins ago

Sterling touches $1.42, hits highest vs euro in a year

By Ritvik Carvalho LONDON (Reuters) – Sterling hit $1.42 on Wednesday, coming within touching distance of $1.43, while also reaching...

Strong German data helps European shares recover; Wall Street futures subdued 15 Strong German data helps European shares recover; Wall Street futures subdued 16
Investing45 mins ago

Strong German data helps European shares recover; Wall Street futures subdued

By Elizabeth Howcroft LONDON (Reuters) – European shares rose but U.S. stocks futures pointed to a further tech sell-off in...

EasyJet to raise up to 1.2 billion euros from bond issue 17 EasyJet to raise up to 1.2 billion euros from bond issue 18
Investing4 hours ago

EasyJet to raise up to 1.2 billion euros from bond issue

By Yoruk Bahceli and Abhinav Ramnarayan AMSTERDAM (Reuters) – EasyJet will raise 1-1.2 billion euros from a seven-year bond sale...

ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion 19 ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion 20
Business4 hours ago

ExxonMobil to sell some UK, North Sea assets to HitecVision for over $1 billion

(Reuters) – Exxon Mobil Corp said on Wednesday it would sell its non-operating interest in its UK and North Sea...

JPMorgan's blockchain payments test is literally out of this world 21 JPMorgan's blockchain payments test is literally out of this world 22
Business5 hours ago

JPMorgan’s blockchain payments test is literally out of this world

By Anna Irrera LONDON (Reuters) – Stuck in space with bills to pay? Don’t worry, the satellites could take care...

Aussie, pound soar on reflation bets; dollar struggles 23 Aussie, pound soar on reflation bets; dollar struggles 24
Trading5 hours ago

Aussie, pound soar on reflation bets; dollar struggles

By Saikat Chatterjee LONDON (Reuters) – The dollar struggled at multi-year lows against the Antipodean currencies and held near a...

Garment workers in Thailand receive full compensation after wages expose 25 Garment workers in Thailand receive full compensation after wages expose 26
Business6 hours ago

Garment workers in Thailand receive full compensation after wages expose

By Nanchanok Wongsamuth BANGKOK (Thomson Reuters Foundation) – Garment workers in Thailand who were illegally underpaid while making products for...

Newsletters with Secrets & Analysis. Subscribe Now