A Recovery Auditing Overview

Written By: Kylee Savage, Marketing Manager, ksavage@spendmend.com

What is Recovery Auditing?

Recovery Auditing, also known as an accounts payable (AP) audit, is a review of both your accounts payable historical data and your vendor’s accounts receivable (AR) records.

An audit helps identify transaction errors such as overpayments, duplicate payments, pricing errors, under-deductions, unclaimed supplier credits, and more.  Even if you feel your hospital has optimal controls, systems, and staff in place – the evidence strongly and consistently suggests that you should still be performing a Recovery Audit.

No system or employee operating within the procure-to-pay (P2P) cycle is completely error-free. Every ERP and legacy system can override established controls. And often, communication between supply chain, procurement, AP, receiving, and your suppliers is effective, but there will always be times when it is not.

The History of Recovery Auditing

Recovery Auditing traces its origins to the late 1970’s retail industry where competition for suppliers vying to gain a presence in large stores was fierce.  As such, suppliers issued many promotional discounts and rebates that led to confusion and accounting mistakes.  These mistakes are part of a larger problem known as “financial leakage” which springs from different control gaps and process gaps that show up throughout the P2P process as well as the cost-cycle.

Recovery Auditing in Healthcare

As the recovery industry matured, new forms of Recovery Auditing became popular in other industries outside of retail.  In time, the healthcare industry began to embrace the use of these audits because of the overwhelming difficulties facing large healthcare systems as they tried to support patients, payers, and providers.

For more information regarding the benefits of having a Recovery Audit to help boost your hospital’s bottom-line or to drive new insights and visibility into you cost-cycle, contact SpendMend today.