Related Content
- $6.6M+ P&L Impact Unlocked for a Leading Automotive Aftermarket Retailer
- $500K+ P&L impact unlocked for a global travel-retail & duty-free operator
- $8M+ in P&L impact recovered from a two-banner ERP integration
- $20M+ in P&L impact discovered for AB InBev in 8 weeks
- $100M+ discovered for Target through 5 years of vendor-funding recovery
$6.6M+
Recovered across four review phases
$8.8M
Total exposure surfaced
$4B+
Spend reviewed: 100% tested, not sampled
14,000+
Active vendors analyzed
Operating Context
Serving DIY and Professional Installers at National Scale
The company owns one of the biggest automotive aftermarket businesses in North America. They cater to do-it-yourself consumers and professional installers alike via its extensive network of stores and commercial distribution channels.
Largest North American Auto Aftermarket Retailer
An operation spread across thousands of retail outlets and distribution centers that serve consumer and business clients.
~14,000 active vendors
An extensive list of suppliers including parts manufacturers, distributors, private label suppliers, and indirect/MRO vendors at stores and distribution centers.
High Volume Of
– Direct purchase of parts from hundreds of thousands of SKUs
– Vendor rebates, discounts, allowances, and commercial initiatives
– Indirect/MRO spending dispersed across a national store and distribution center network
– Contract pricing with multiple tiers, frequent changes, and program changes seasonally
Challenging Control Environment
– A current ERP system with three-way match automation
– Internal audit department
– Big Four external audit
– Third-party recovery audit completed in the previous cycle
The Problem
Why Sampling, Exact-Match Rules, and Top-Vendor Sweeps Can Miss Leakage
The organization possessed a mature system of financial governance. The Big 4 audit coverage, internal audit, ERP automated controls, and the third party recovery process offered several levels of oversight. However, with $4 billion-plus spend and 14,000+ active suppliers, even mature systems of control have natural limitations. A typical audit procedure focuses on the evaluation of controls, financial statements, and selected transactions. The matching process of ERP focuses on validation of structured data within certain fields. The recovery audit is typically focused on high value vendors and familiar transaction types. In each of these cases, there was no intent to reconstruct the entire business arrangement for 100% of transactions and unstructured vendor documents. This difference created an opportunity for leakage to be concealed.
01
Audit Sampling Boundaries
Conventional audit methods employ sampling and risk assessment techniques as opposed to full transactional review. Tail spend and smaller-value transactions can thus be excluded from the transaction review universe.
02
Rigid ERP Matching Logic
Automated three-way matching can confirm relationships between purchase orders, receipts, and invoices. Automated matching does not automatically indicate whether the PO or the invoice include pricing and terms from contracts, amendments, or other unstructured sources.
03
High-Dollar Sweep Bias
Traditional recoveries reviews could focus on direct vendors and high-dollar value transactions. It would lead to incomplete reviews of some indirect, MRO, and tail spend categories.
04
Off-System Contract Drift
Pricing changes, volume thresholds, rebates, credits, discounts, and other negotiated terms may exist in the contract, in PDF files, email, spreadsheets, or in amendments that are not captured in structured ERP data.
The Gap
The problem was not that there were no financial controls.
The problem was the gap between what the systems could verify and what the commercial terms required.
How We Solved It
Restoring Commercial Context Across 100% of Procurement Transactions
The Discover Dollar team did not approach the project as yet another transaction audit but instead approached it as a full-population commercial reconciliation. 100% of the $4 billion plus transaction population was ingested and analyzed, tying structured ERP entries to unstructured documentation containing commercial details.
Structured Data (ERP)
What the ERP knows:
– Purchase orders
– Invoices
– Vendor master data
– Goods receipts
– Payment records
– Transaction histories
Unstructured Data (3TB+)
Where the real agreement lives:
– 14,000+ supplier contracts
– Contract amendments and addenda
– Negotiation emails
– Supplier correspondence
– Offline spreadsheets
– Other commercial documentation
01
Full-Population Data Ingestion
Connecting AP and procurement data securely for over $4 billion in spend. It allows to test the entire transaction population rather than using a sample.
02
Commercial Terms Extraction
Implemented advanced NLP to identify pricing, rebate, credit, discount, volume, and other commercial terms contained across supplier contracts, amendments, and emails.
03
Intent Matched to Execution
Matched authorized commercial terms against historical purchase orders, receipts, invoices, and payments. They help to identify where actual execution differed from the agreed economics.
04
Material Mismatches Surfaced
Isolated and prioritized P&L-impacting discrepancies by materiality, providing finance teams with validated, actionable claims.
05
Embedded Recurring Visibility
Embedding recovery signals into ongoing dashboards. It helps to provide continued visibility into emerging leakage and reduce reliance on periodic recovery exercises.
Value Scenarios Unlocked
Six Leakage Categories, One Root Cause
The engagement came across various procurement recurring sources and accounts payable leakage. Each of them represented a different way how the transaction execution could diverge from the commercial agreement.
Primary Scenario
Cost Overcharges
$2.1M+
The invoiced unit costs were above what the terms of commerce would support, whether it was compared to the purchase order, contract rates, or the historical cost of the same material. Since the invoice was valid according to normal PO, receipt, and invoice matching criteria, the price difference alone was not automatically considered out-of-line.
Discovery Of The Issue By Discover Dollar
– Compared the invoiced unit costs to PO and contract rates
– Compared the currently invoiced prices against historical prices for the same materials
– Discovered quantity differences when the quantity billed exceeded the quantity received
Outcome: Overcharges in cost were the largest category discovered at $2.1M+.
Once visibility was established between:
Contract & PO Intent
Invoiced Cost
Validated Recovery
Material value surfaced rapidly.
Beyond cost overcharges, five further patterns surfaced, each repeatable, each missed by audit, ERP, and prior recovery:
Payments were found within duplicate invoices, split-line entries, and incorrect vendor accounts. The traditional methods of detecting duplicate payments become challenging when duplicate transactions do not match perfectly.
Where the amounts earned had not been recorded completely in accounts payable, contractual volume rebates and incentive programs were noted. Discover Dollar analyzed contract eligibility and performance based on the payment data in order to determine missing or miscalculated rebates.
Vendor credits were discovered where there were credit notes that were either not processed, only partially received, or properly reconciled to subsequent payments. The study reconciled vendor credits against vendor invoices at a transaction level.
Contractual pricing, payment terms, discounts, and other commercial conditions were compared against actual AP execution. It helped to identify instances where agreed terms were not fully applied.
Vendor statements were compared to the accounts payable file to identify cases of underpayments, skipped payments, or other exceptions, including those that fell into the long tail of the vendor population.
From Six Scenarios to One Common Theme
The common problem in all six of these categories was the same:
Existing controls could provide assurance that a transaction went through a proper process. However, they were not set up to ensure that every transaction was validated in its entire commercial context.
Through integration of contracts, commercial terms, ERP transactions, payment documents, and supplier documents, Discover Dollar achieved visibility of value that could be missed by traditional auditing and ERP matching approaches.
Frequently Asked Questions
Common Questions on This Engagement
Discover Dollar collected over $6.6 million through four reviews and identified over $8.8 million worth of exposures through more than $4 billion in spending and roughly 14,000 suppliers. This analysis included the entire transaction base and not sampling alone.
Each control layer has its own objective. Audits normally employ risk-based methods and sampling. ERP systems validate the transactions against their rules configuration and structured data. Moreover, the recovery audits might focus on certain vendors and transaction patterns.
Procurement and AP leakage occurs when financial value is lost because transactions never reflect the commercial terms that should govern them.
This engagement tested 100% of transactions across four review phases rather than a single sweep. Additionally, the same visibility layer continues to catch what audit, ERP rules, and prior recovery sweeps are structurally built to miss.
Discover Dollar's platform is GDPR-aligned and holds AICPA SOC, ISO 27001, and ISO 42001 certifications, so data security is built into every engagement.
Blog comments