The Vanishing Credit: Why AP Recovery Audits Can’t Wait Three Years Anymore

After 25 years of performing Accounts Payable audits, you start to see trends. Some are subtle. This one isn’t, and it’s changed how I think about how often a company should audit.

What an audit is really finding

At the heart of every A/P recovery audit is a simple idea: there is money sitting on your suppliers’ records that never made it into your ERP. Open credits. And they pile up for all kinds of reasons: duplicate payments, overpayments, paying the wrong vendor, pricing errors, tax, returns, rebates, and a dozen others. The audit’s job is to find those credits on the supplier’s side and bring them back to you.

For years, that was a straightforward treasure hunt. When we audited a company that had never done an A/P recovery audit, we routinely found credits that were five years old or more. They just sat there.

The trend: credits are aging out faster

Here’s what’s changed. Today, we rarely find credits older than 18 to 24 months. The old stuff is gone. So where did it go?

The easy answer is escheatment, but that’s not the whole story

If you read a few articles on this, you’ll see one explanation over and over: unclaimed property laws. The idea is that when a credit sits open past a certain number of months, the supplier is required to remit it to the state. And there’s some truth to that.

But that’s not what I believe is really driving it. Escheatment is real, but it doesn’t explain what we actually watch happen in the data.

What’s really happening: suppliers are pruning their AR

Through the 2010–2020 era, most companies audited on a cycle: every three years, every two, sometimes annually. That was fine for the time. About five years ago, we started performing continuous audits: instead of one big look every few years, we reach out multiple times a year to pull updated supplier statements.

That change is what exposed the trend. And what we see is that suppliers are quietly removing aged credits from the statements they show you, often as a matter of policy.

The proof: watching a credit disappear in real time

Let me walk you through what we see all the time now.

In Q1, we pull a supplier statement and spot an open credit that’s only a few weeks old. Good: we flag it. In Q2, we pull again, and it’s still there. Then in Q3, we pull one more time, and the credit is gone. It’s no longer on the statement.

So we check the client’s ERP. The credit was never entered: the company never received or applied it. It didn’t get used. It just disappeared off the supplier’s summary.

When we reach out and ask the supplier what happened, the answers are remarkably consistent. Sometimes it’s, “Oh, that shouldn’t have come off the open AR report; it’s being investigated, but it’s still available for use.” Other times it’s more direct: “It’s our policy that any credit not taken within six months is removed from the AR summary.”

That is now more the norm than the exception. The credit is real, and it may still be recoverable, but you’d never know it existed if you weren’t looking at the right moment.

Why a three-year cycle misses it

Put those two facts together. Credits are being pulled from supplier statements in as little as six months. And a traditional audit cycle looks every two or three years. By the time the cyclical audit comes around, the window has already closed. The credit that was sitting right there in Q1 is invisible by the time you finally look, and you have no idea it was ever owed to you.

Why continuous audits win

This is exactly why we moved to continuous auditing, and why it matters more every year:

• You catch credits while they’re still visible. Multiple statement pulls a year mean you see the credit during the narrow window it’s on the report.
• You build a documented trail. When we can show a supplier that a credit appeared in Q1 and Q2, “we already removed it” stops being the end of the conversation. The evidence forces the issue.
• You stop losing the aged money entirely. The five-year-old credits aren’t waiting around anymore. If you’re not looking continuously, you’re not recovering them at all.

The bottom line

For companies large enough to support it, continuous audits aren’t a nice-to-have anymore: they’re a must. The money hasn’t stopped piling up on your suppliers’ books. It’s just not staying visible long enough for a once-every-few-years audit to catch it.

Curious what’s sitting on your suppliers’ books right now? Start a no-cost Proof of Value. We only get paid a percentage of what we recover.