Indirect

Procurement

Audits

A Variety of Sources

Here are several specific examples of items falling into the indirect procurement category:

1. Company travel and transportation expenses
2. Safety equipment
3. Office supplies and furniture
4. Event planning
5. Professional services, like legal, marketing or accounting
6. Janitorial products

Indirect Procurement Strategy

The idea of an indirect procurement audit is to analyze expenditures associated with supplies and services to find discrepancies in your vendors' invoicing process. A successful audit will also identify areas where you can save money, whether it results in purchasing fewer supplies, using a new vendor or making any other needed adjustments.

Companies sometimes use dark purchasing processes for indirect items, meaning there is no standardized buying practice in place. Also known as ad-hoc ordering, these practices circumnavigate any formal purchasing guidelines a company has in place. Areas like these frequently contain the most discrepancies.

Some specific instances of discrepancy include:

1. Misinterpretation: Incompliant or vague contract terms without clarification.
2. Promised incentives not applied: Rebates, credits or volume discounts not reflected on invoices.
3. Inaccurate delivery schedules: Unjustified late fees combined with rushed lead times.
4. Incorrect invoicing: Goods or services billed at the wrong amount.
5. Ineffective inventory management: Unnecessary delivery of goods based on inexact inventory counts.
6. Poor vendor performance: A supplier's inadequate performance affecting your company's production.

Once we help you identify these areas, we can take the necessary proactive measures to optimize future spending. Our auditors will sometimes find discrepancies dating back years.

The Audit Process

Here's an overview of each step of our audit process:

• Supplier Selection: We work with you to determine which suppliers to audit. We can audit suppliers of any size, in any region, and in any category.
• Data Gathering: We gather all of the necessary information to begin the audits. This starts by reaching out to your procurement team / category managers to acquire the agreements and legal documents. We then reach out directly to the suppliers on your behalf to gather the historical transactional data, pricing details, legal documents, and anything else deemed necessary to complete the audit.
• Audit Analysis: Our consultants complete a comprehensive audit and analysis. We verify that the prices you paid are consistent with your contract.
• Presentation of Results: After we complete the audit, we meet with your organization to discuss the results, recovery, and next steps.
• Reconciliation: We work directly with the supplier to return any overcharges uncovered during the audit.
• On-going Optimization and Monitoring: After the historical audit has been completed, clients often opt to continue to work with us on an ongoing basis.

Benefits of a Successful Indirect Procurement Audit

The short- and long-term benefits a successful audit will produce include:

• Reduction of costs: A successful audit will trim antiquated, bloated or traditional spending methods and create uniform spending practices throughout your company.
• Identifying outdated processes: We'll help establish innovative and effective purchasing methods that save money and improve operating efficiencies by eliminating issues like on-the-fly purchases and verbal contracts.
• Increased vendor accountability: By identifying invoicing errors and discrepancies, vendors streamline and increase the accuracy of their internal processes.
• Creating measurable goals: After the audit, your company can analyze and track the entire procurement process, creating approved supplier lists, vendor reviews, price indexes and more.