Curbing cash leakage to save millions in supplier overpayments

Challenge

Losing money, plain and simple

The retail industry is prone to supplier overpayment and eroding margins. To minimize leakages and improve recovery from suppliers, the client had an existing post-payment audit program in place, managed by a leading third-party PPA provider. However, even after performing multiple audits, its PPA program at the time posed the following issues:

• The company's overall recovery percentage was 50% lower than the industry average at 0.1%
• The company's contract database was prone to errors, and it was not integrated with underlying transactions and billing data, making accurate reconciliation impossible
• Errors continued in the PPA system, leading the company to only be able to recover between 65% and 71% of overpayments over six years – far less than the industry standard
• These challenges were causing the company to lose money left and right. In a competitive, low-margin industry, the suboptimal performance of the PPA program was creating significant problems such as margin erosion (in an already low-margin, highly competitive retail industry) and adverse impact on the cash flow. The company was looking for a service provider that would offer a comprehensive and robust solution

Solution

A bespoke digital recovery strategy

Genpact stepped in to assess the end-to-end PPA program and identified four key priorities to tackle. Keeping these priorities in view, the Genpact team took the following steps to transform the PPA program:

• Limit disruption to the existing recovery program - While the focus was to bring in a new PPA solution, pausing the existing audit and recovery process at any point would have had a material impact on the company's finances. As we continued to build, test, and implement the new solution, an interim suite of semiautomated systems and applications was leveraged concurrently to support and manage the audit program and recovery process
• Lead with digital capabilities – The analytics application used by the firm was almost a decade old and lacked the requisite modern-day sophistication and agility to adapt to the changing business environment and run comprehensive audit scenarios. We deployed a solution with dynamic workflow, advanced analytics, and Microsoft Power BI visualization customized to the company's needs. It was hosted on the Microsoft Azure cloud platform. The outcome was a more efficient, effective, and faster payment recovery
• Double down on Genpact's Lean Six Sigma expertise to drive root cause fixes – Genpact used Lean Six Sigma principles to review payment contracts on 12,000+ invoicing claims from the last two years to identify the root cause of the leakages. The team then collaborated with the sourcing, accounts payable, and control teams to formulate feasible solutions to eliminate leakages in the upstream processes

Impact

Increased share of total recovery, improved realizations, and continuous improvement

By helping the company transform the PPA process, it's now in a better place to drive initiatives that lead to business growth. Here are some of the most impactful achievements Genpact has delivered for our client:

• The share of the total recovery went up to 85% in the first year, bringing down the overall cost of the program significantly
• Together with the client, Genpact has identified and fixed multiple root causes of the leakage through system configuration changes, process streamlining, and metrics monitoring to prevent annual leakages worth $2.6 million
• We recovered $26 million in overpayments in the first year, compared to $15 million the year before – a year-over-year growth of 73%

Perhaps the strongest indication of a job well done is being asked back to do more work. Genpact's success on this project has led to an enhanced scope of work encompassing other avenues of recovery with the retailer.