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Benefits of a Procurement Audit for Private Equity Firms & Portfolio Companies

Benefits of a Procurement Audit for Private Equity Firms & Portfolio Companies

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Published by josh_fuhr
Private equity firms are constantly looking for ways to increase the profitability of portfolio firms to eventually lead to a higher sales price when the time is right. Their portfolio companies look to them as a resource for valuable revenue increasing and cost savings measures. Unbeknownst to many firms, there are actually lost profits locked up in the procurement process as a result of vendor errors, process breakdowns, ERP system migrations, and complex procurement environments. Auditrax provides a unique, risk-free solution that audits the procurement process of clients over a historical period to identify lost profits by exposing the process breakdown, recovering the capital from vendors, and preventing future errors through actionable recommendations. A procurement audit can quickly increase the value of portfolio companies, making them more attractive to potential buyers, and more profitable for their equity group.
Private equity firms are constantly looking for ways to increase the profitability of portfolio firms to eventually lead to a higher sales price when the time is right. Their portfolio companies look to them as a resource for valuable revenue increasing and cost savings measures. Unbeknownst to many firms, there are actually lost profits locked up in the procurement process as a result of vendor errors, process breakdowns, ERP system migrations, and complex procurement environments. Auditrax provides a unique, risk-free solution that audits the procurement process of clients over a historical period to identify lost profits by exposing the process breakdown, recovering the capital from vendors, and preventing future errors through actionable recommendations. A procurement audit can quickly increase the value of portfolio companies, making them more attractive to potential buyers, and more profitable for their equity group.

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Published by: josh_fuhr on Jun 28, 2011
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01/23/2012

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July 1, 20111971 East Beltline NESuite 207Grand Rapids, MI 49525(616)726-0982www.Auditrax.com
Benefits of a Procurement Audit
for Private Equity Firms & Portfolio Companies 
AnAuditraxWhite Paper
 
 
Contents
Problem Statement 2
 
Results
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Introduction
Private equity firms are constantly lookingfor ways to increase the profitability of portfolio firms to eventually lead to a highersales price when the time is right. Theirportfolio companies look to them as aresource for valuable revenue increasing andcost savings measures. Unbeknownst tomany firms, there are actually lost profitslocked up in the procurement process as aresult of vendor errors, process breakdowns,ERP system migrations, and complexprocurement environments. Auditraxprovides a unique, risk-free solution thataudits the procurement process of clientsover a historical period to identify lostprofits by exposing the process breakdown,recovering the capital from vendors, andpreventing future errors through actionablerecommendations. A procurement audit canquickly increase the value of portfoliocompanies, making them more attractive topotential buyers, and more profitable fortheir equity group.
 
 
Problem Statement
Every company that engages in procurement transactions is
losing nearly .5% of its’
yearly revenue, regardless of thesize, complexity of internal controls, or quality of staff.Some vendors erroneously bill their clients as a mistake,and some do so intentionally to increase profitability. ERPsystems often miss duplicate payments, and the increasedreliance on technology has taken the human review of invoices out of the equation, leading to increased losses.Companies today continue to allow their profits to escapeby avoiding outside audits of their payable transactions.Many believe that the audits done by CPA firms will catchthese types of errors, or that their internal audit departmentis sufficiently capable of catching any errors that mightoccur. Despite these perceptions, the profits continue toescape.
Previous Options
Accounts payable firms have been around for decades.Recently there has been a significant shift away fromrecovering the greatest potential of lost profits for eachclient. Currently, these firms use a skimming technique torecover easily identifiable errors, while avoiding morecomplex in-depth techniques to uncover larger recoveries.These companies use weekly recovery quotas to dictatewhen the audit team will be removed from the client siteand the audit terminated, leaving potentially significant un-recovered lost profits to slip away forever.
Auditrax Solution
The Auditrax solution to this problem is a procurementaudit with 3 distinct features to increase the profitability of clients firms without adding expense:1.
 
Non-Intrusive
 – 
Once the sales meeting has taken placeand an agreement has been reached, our audit team willwork independently to recover lost profits withoutburdening management or staff.2.
 
Contingent
 – 
By billing only for claims collected in theform of a check or credit memo, Auditrax does not addexpense to the client without adding a real benefit.

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