Why You Must Perform a Purchase Audit

Buyers' Training
December 17, 2012 — 1,083 views  
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Right now, employees are looking for ways to undermine your corporate purchasing and billing programs. Right now, someone is trying to find a loophole that will allow them to siphon off corporate funds for personal gain. Be it through theft or through blatant cronyism, right now, your purchase program is vulnerable to abuse. Without proper audits and regular review processes, these individuals can steal thousands of dollars from your organization.

That example might be a bit extreme, but it underscores a significant problem and threat many businesses often underestimate or ignore entirely. A growing level of purchase fraud and abuse has been detected in companies, particularly in the wake of the global meltdown of 2008. Much of this systemic theft and fraud can be eliminated and prevented with routine purchase audits by independent auditors.

These audits are performed by purchase specialists looking for ways to exploit the existing program. After a thorough review of the guidelines in place, they begin exposing all of the potential ways someone familiar with the program could rip the company off. After that, they propose new solutions to prevent future fraud.

Beyond looking at the ways the program in place could be exploited, a purchase audit can look to see if the current system is already being taken advantage of. A thorough review of every purchase, every cost, and every piece of inventory on hand can help clue purchase clerks into very real and costly issues taking place right under their noses.

A regular purchase audit regime can find discrepancies early, cutting off the flow of easy cash to the thieves. The same regime can find ways to improve and streamline the purchase process, making it run faster and with fewer mistakes. Every bit of increased productivity, increased accuracy, and reduced cost is a net benefit for the company as a whole.

A thorough purchase audit should examine purchase orders and how they are processed. It should examine the entire accounts receivable and accounts payable from vendors and suppliers. Further, the audit should include examining the receiving and shipping department, to include distribution chains and internal audits and inventory processes. Each of these offers chances for increased productivity and reliability. They also offer crooks a chance to game the system to their favor.

A purchase audit is the best way to stop and prevent fraud within the company. One should be performed at least every year.

 

Buyers' Training