Client
A Fortune 500 Global Independent E&P company
Industry
Oil and Gas
Project Timeframe
2003 to Present
Revenew Services
Supplier Payment Reviews & Real-Time Reviews
Project Scope
When recovery audits became an accounts payable best practice in the early 2000s, a leading global energy company engaged Revenew to perform a retrospective cost recovery audit of one of its primary business units. The relationship that began in 2003 continued with subsequent audits every two to three years. Over a several-year period, beginning in 2009, the client’s procure-to-pay process underwent significant changes when it outsourced the AP function to a third-party provider and later switched to a second provider several years later. In addition, the client undertook a major upgrade to its SAP ERP system. Both of these major changes contributed to an increase in error rate.
Simultaneous with those internal events were external events that spiked drilling activity and earnings: a huge uptick of onshore drilling and new fracturing and horizontal drilling technologies for the extraction of natural gas and oil from rock formations.
Things – and money – moved quickly amid the drill baby drill era, and Revenew’s recoveries mounted. The 2010 audit had $1.6 million in recoveries, nearly double the amount of prior audits. That trend continued with the 2012 audit yielding $5.5 million in recoveries and the 2013 audit jumping to $14.5 million. Based on these dramatic increases, Revenew recommended pivoting to a different audit model to tighten controls in real-time.
Revenew’s Approach
Prior engagements with this $13.8 billion global giant gave Revenew unique insight into the magnitude for potential errors associated with 2,000+ suppliers and 1,700+ employees on three continents and operations in six countries. Revenew shifted from a retrospective cost recovery audit – a single project with defined auditing dates, typically 12 to 36 months – to a continuous audit program – an ongoing process for auditing recent accounts payables. This process involves the monthly extraction of AP data from the client’s ERP system to expeditiously identify payment errors and exponentially increase the likelihood of recovery.
Outcomes
Real-time feedback on errors being made has enabled the company to refine its processes, put the right people in the right places, resolve issues with vendors, provide necessary training, identify open statement credits, and hold third parties accountable to their service level agreements.
Key outcomes over Revenew’s 22-year relationship with this client include:
- Retrospective cost recovery audits: Recoveries increased 243.75% from $1.6 million in 2010 to $5.5 million in 2012, followed by a 163% increase in 2013 to a recovery high of $14.5 million.
- Continuous auditing: Drove rapid improvement and returned the client to a recovery level consistently in line with or below the industry standard and near its original 2003 audit number.
- Cumulative recoveries: $38.6 million.
Notably, companies with $2 billion-plus in annual sales typically have at least one major event that significantly impacts their procure-to-pay process every three to five years, whether a system change, an acquisition, or outsourcing, and a continuous auditing program represents a strategic tool for real-time risk mitigation.