Healthcare Supplier Returns Credits
| Client Snapshot | |
|---|---|
| Region | Midwest |
| Headquarters | North Dakota |
| Employees | 3,500 |
| Beds | 300 |
| Patient Revenue | $563 Million |
Supplier Returns Supplier returns involve sending back products to a vendor due to issues like defects, incorrect items, or excess stock. When a return is initiated, it typically requires a return purchase order and, upon completion, a corresponding credit memo from the supplier. Ensuring healthcare supplier returns credits are properly processed and credited is critical to avoid financial loss from unclaimed credits or unrefunded payments. Tracking supplier returns helps maintain accurate financial records and ensures that the company only pays for items that meet its requirements.
problem
PCR was recommended to a large healthcare system by a consultant to conduct a comprehensive accounts payable recovery audit. This healthcare system had not undergone an AP recovery audit in over five years, meaning there was significant potential for unclaimed credits and overpayments. The healthcare system had recently switched to a new Enterprise Resource Planning system for payment processing while continuing to use its legacy system to manage purchase orders. This transition presented unique challenges in reconciling records across both systems, leading to increased complexity in AP processes, especially in managing healthcare supplier returns credits. With the consultant’s endorsement, the healthcare system selected PCR to undertake this audit.
results
PCR’s auditors embarked on a full AP recovery audit. Given the healthcare system’s dual-system setup, the audit involved extensive data review across both the legacy PO system and the new ERP system. This approach allowed PCR to identify and recover missed credits and overpayments by leveraging our expertise in handling intricate AP structures. The audit focused on multiple key areas, including:
- Duplicate Payment Review – Identifying and reclaiming payments made in error.
- Returns Not Closed with Credit Memos – Finding product returns that were initiated in the legacy PO system but not closed with credit memos in the ERP system, a key area for healthcare supplier returns credits.
- Sales Tax Review – Ensuring accurate sales tax payments to avoid unnecessary expenses.
- Contract Compliance – Verifying pricing aligns with vendor contract terms.
- Rebate Review – Recovering rebates that were earned but not issued.
Remote Data Analysis Minimizes Impact on AP Department
PCR’s approach involved remote work, with the healthcare system securely uploading data to our servers. This setup allowed our auditors to analyze accounting data efficiently while significantly reducing our impact on the AP department’s daily workflow. Additionally, we accessed the healthcare system’s imaging system to review invoice copies directly, ensuring accuracy and thoroughness. PCR’s team also worked directly with vendors, further reducing time demands on the client’s AP department.
Our audit uncovered several discrepancies that led to significant financial recovery for the healthcare system. One major finding involved a high number of product returns recorded in the legacy PO system that were not followed through with credit memos in the ERP system. PCR’s analysts noticed that many of these returns were missing corresponding credit memos, meaning the healthcare system had not been credited for returned products. This oversight represented a substantial financial opportunity, as unprocessed healthcare supplier returns credits accumulated to a significant amount.
Uncovering Supplier Credit Discrepancies Yields Significant Recoveries
PCR’s auditors contacted vendors to confirm the status of these supplier returns. By conducting follow-up discussions with vendors, we secured over $340,000 in credits associated with these returns alone, which accounted for over 75% of the total recovered funds. This discovery not only recovered a large amount of money but also highlighted a critical process gap in the healthcare system’s transition to the new ERP system.
The audit’s other focal points, such as duplicate payment review and contract compliance, yielded additional recoveries. During the course of our accounts payable recovery audit, we recovered over $1,400 per staffed bed, including healthcare supplier returns credits, that would otherwise have been lost.
benefits of working with pcr
- PCR recovered over $1,400 per staffed bed, uncovering missed credits and overpayments across multiple AP areas, including healthcare supplier returns credits.
- The audit required minimal client involvement, with our client spending an average of just 15 minutes per week reviewing recoveries in real-time through our online Claims Management Portal.
- Our comprehensive review identified gaps between systems, enhancing the healthcare system’s process efficiency and compliance, and our final audit report included a roadmap to prevent future discrepancies.
PCR’s accounts payable recovery audit successfully addressed several inefficiencies in the healthcare system’s payment processes. Our team’s remote, detailed approach—backed by a seamless data-sharing setup and comprehensive vendor outreach—resulted in a total recovery exceeding initial expectations. This financial benefit not only provided immediate value but also prompted the healthcare system to re-evaluate its processes for handling returns and credit memos.
Additionally, PCR’s work underscored the importance of regular AP audits, particularly when managing transitions between systems. By addressing gaps in the new ERP system, this healthcare system is now better positioned to capture credits, prevent duplicate vendor payments, and streamline vendor contracts.
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