The Retailer Spring Edition 2021

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contract compliance audit merely aims to ensure what was agreed by both parties is reflected in invoices. Let suppliers know that the audit is about embedding best practices, not inves - tigating wrongdoing. By positioning it as a health check that can identify gaps or misunderstandings in con - tract language, or areas where both parties can benefit from process changes, a contract compliance audit can actually strengthen the retailer-supplier relationship. Today’s contract compliance audits apply a methodology for reviewing supplier relation - ships to verify they are in linewithwhat’s been negotiated in contracts, including change orders and related documents. Traditional audits focus on high-risk suppliers that sit in a category with a lot of spend, have complex contracts, orwhere prior known issues have been identified. In these cases, the audit focuses on drilling down into each supplier’s billing practice. The market is nowdemanding audits with more robust methodologies that shift the focus from reactive to preventive. They deliver everything a traditional audit does but aim to create sus - tainable value by rooting out the causes of profit leakage and improving supplier relationships. Embrace change in contract audit methodology

The potential value of a full, robust contract audit methodology is much higher than what historical recoveries alone can deliver. And increasingly, retailers are implementing self-funding audit programs, which simply means the budget for the process is reimbursed with cash recouped from recovered claims. For instance, recoveries can accumulate in a central audit reserve, which acts as a joint investment between a retailer and its audit partner – ensuring both parties have a vested interest in success. Using a self-funding project model to support a more robust audit methodology can provide budget flexibility and shift the focus of audits from retrospective to the future. Profit leakage is stopped before it happens, and relationships with suppliers run more smoothly. Recover profit, improve supplier relationships The phrase “You don’t know what you don’t know” rings true for retailers lacking a self-fund - ingGNFR contract compliance audit programme. But those embracing one, particularly when selecting an experienced audit partner to do the heavy lifting, soon find out that money slips through the cracks when supplier contracts are left unchecked. But once an audit takes place, and hundreds of thousands – even millions – of lost profit is recovered, these retailers benefit in the long run with more revenue in their pocket, improved processes going forward and strengthened supplier relationships to boot.

James Albrecht Jim.albrecht@prgx.com 1 (414) 405-8140

Vijay Parekh Vijay.parekh@prgx.com +44 (0) 7738 496337

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