Business Strategy

Aviation Manufacturer Secondary Audit

General Aviation Manufacturer Needed Course Correction

CLIENT
General Aviation Manufacturing Company

INDUSTRY
Manufacturing

Proud of Heritage, Focused on Future
As a leading manufacturer in General Aviation, this client has been number one in sales and deliveries in their industry for years. They recognize their responsibility as a leader in the global community as well; furthering causes and organizations that help the communities in which they have facilities. They value programs that take a creative approach to issues such as education, neighborhood improvement, youth development, environmental conservation and preservation of the arts. They are committed to helping to build and perpetuate healthy communities. Worldwide, they have over 15,000 employees and receive billions of dollars in orders. They are proud of their heritage, but even more excited about their future potential.

Problems Identified, Lack of Communication
This aviation products manufacturer had an existing primary audit firm in place. As the primary audit progressed, the client became exceedingly disappointed with the claims management process; there was an evident lack of tracking and reporting of claims, and the client felt there was insufficient progress updates. The client also began to suspect there was a shortfall in audit penetration and scope, which created concern that there were greater recovery results available. They were also unsatisfied that the firm offered no process improvement recommendations.

This aviation products manufacturer was looking to augment or replace their existing audit firm with a firm that had expertise in the industry, as well as a proven portfolio of process enhancement suggestions. BSI was already performing a procure-to-pay audit with the client’s sister company and maintained a high level of familiarity with the industry. BSI was an obvious choice as a business partner because of their knowledge and focus on elevating clients’ processes and results.

Course Correction Needed, Identified
Even after the primary audit firm had completed the majority of their AP review, Business Strategy’s secondary audit uncovered a lack of policies and controls in place to ensure freight and warranty credits were being issued for vendor returns. BSI also determined that time constraints and lack of resources meant internal staff seldom had the opportunity to match debit memos or close unmatched open invoices. Business Strategy isolated control gaps from contract to payment and identified errors in pricing, unclaimed rebates, and overlooked credits.  BSI worked to clean up supplier reconciliation issues, including unmatched debit memos and open invoices - a process which the client could not have completed while continuing day to day operations in their ERS environment. BSI recommended process enhancements and internal controls to strengthen the vendor returns process; then worked with vendors to secure credits for previous payment errors.

Communication is Key to Success
The client was disappointed with the initial audit firm’s insufficient results, poor claims administration, and their lack of communication. Business Strategy provided a communication approach that was beyond the client’s expectations. BSI combined a low-intrusion process with high-levels of information. Weekly management meetings required only, on average, one hour of the client’s time. These meetings facilitated movement of claims and discussions regarding vendor relations, obstacles, and implementation of early process recommendations. The client shared, “We have been extremely impressed that BSI provides explanations to all of its findings and recommendations for solving the processing errors that originally created the claim.”

More Complete Review, Better Returns
Business Strategy was brought in to perform a secondary procure-to-pay audit, including contract compliance reviews and a complete audit of the accounts payable process - a Four-Way Match™ rather than just a review of invoices and statements. Contract compliance and vendor return errors accounted for nearly 70% of the recovery in the secondary audit. The Primary audit conducted by the existing firm uncovered approximately $300K; however, with the secondary audit performed by BSI, the client realized over $1.4 million in additional recovery. Beyond recovery of AP funds, a primary focus of the ongoing engagement has been to recommend best practices for the client. Business Strategy continues to provide comprehensive review, assistance, resolution and recommendations to the client for process improvement. Implementation of proposed policy and control solutions has resulted in significant declines in errors and overpayments.

Bottom Line, Results
The client used their “out clause” with their primary audit firm and has moved BSI into the primary position. Through the partnership with Business Strategy, over $1.4 million has been recovered for this aviation manufacturer.

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