Importance of Annual Account Payable Audits
“How often should we do an AP recovery audit?” I get that question in almost every first conversation. My answer usually starts with a story.
A few years ago, one of our clients discovered they had overpaid a vendor by $400,000. We caught it, and they recovered the money within 20 days. Twenty days. If that error had sat unnoticed until the next audit cycle, two or three years out, there’s a real chance it would have been gone for good. That’s the case for auditing every year, in a single example: the faster you look, the more you get back.
After 25 years of doing this, here’s why I believe most organizations should run an Accounts Payable audit annually.
Change happens every year, and change costs money
Think about everything that shifts in a year: AP automation, outsourced invoice processing, personnel turnover, a new ERP or finance system, an acquisition. Every one of those is a chance for new errors to creep in. An annual audit catches the leakage those changes create before it compounds.
It brings cash back into the business
The most direct reason to audit is simple: it puts money back in your account. And unlike most finance initiatives, a recovery audit is designed to pay for itself: the recoveries fund the work, and then some.
It finds credits before they disappear
Open credits and supplier accounting errors are a core part of what an audit uncovers. The catch is that suppliers increasingly remove aged credits from their statements, often within months. Audit regularly and you recoup those credits while they’re still visible. Wait a few years and they’re simply gone. (I wrote more about that in The Vanishing Credit.)
Technology made frequent audits painless
Audits used to mean auditors traveling to your offices and camping out for weeks. Today the work is done almost entirely off-site, with minimal disruption to your AP team. The old reason to audit infrequently, that it was disruptive, just doesn’t hold anymore.
It turns one-time fixes into lasting improvements
A good audit doesn’t just recover dollars; it shows you where they leaked. Every year you audit, you get another look at the bottlenecks, the process gaps, and the controls that need tightening, so the same errors stop happening. Over time, that’s how leakage goes down and stays down.
The bottom line
Annual audits keep you close to your data: you catch mistakes early, recover more, understand why they happened, and prevent the next ones. The money is piling up on your suppliers’ books whether you look or not: the only question is whether you find it while it’s still recoverable.
Wondering what a year’s worth of AP activity is hiding? Start a no-cost Proof of Value. We only get paid a percentage of what we recover.
Karl has spent 25+ years in AP auditing and analytics, helping finance teams recover lost value and understand their payables. He writes about what he’s actually seen in the field. Read his story →