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A billion dollar warehouse club chain established a new defective goods program with its’ suppliers. Instead of dealing with a multitude of varied supplier programs, each buyer had to negotiate a percentage discount to be given off invoice from each supplier. These discounts ranged from 1/8 of 1% (.00125) to 2% (.02) depending on the type of product. Each discount was set up in the system and showed up on every applicable purchase order issued by the company. However, this company also had an auto-pay "perfect match" control system in use. Tolerance levels were typically set at ¼ of 1% (.0025) but could also be manually adjusted upwards where needed. The A/P audit, in reviewing the year’s transactions, discovered that the client was not receiving the defective allowances as expected due to a number of different reasons. The biggest reason was that although the suppliers agreed to give the discounts, typically they would not reflect these discounts off invoice as they would expect the warehouse club to deduct them at the time of payment. Many times the defective discount expected would be less than the set-up tolerance percentage so nothing would ever be billed back. The auditors, reviewing each vendor one-by-one, wrote up over $300,000 on this one oversight during the first year. Subsequent audits recovered significant amounts until the client was able to fully institute the recommendations given by the auditors.

A minor system error cost one company at least a million dollars a year until it was discovered by one of our principals in an audit. The multi-billion dollar distributor dealt with dozens of different vendor payment terms in its automatic payment system. The system would access a terms table that included all of the necessary variables to determine the correct discount and payment date of the transaction. However, a logic error was imbedded in the program whenever EOM terms were being calculated. Although the client considered the last day of the month (in EOM context) to be the 25^th, their program did not process it as such. Consequently, every invoice that was given EOM terms and was dated exactly on the 25^th of any given month ended up being paid a full month early. It was determined that this cost the client over 1 million dollars a year!

A large grocery chain had determined it wanted to issue automatic billbacks for all performance-related allowances. A tracking system was set-up to capture all purchases within the promotion dates negotiated between their buyers and the vendors. The newly installed system was hailed as "fool-proof" and took a great burden off the personnel who had been manual processing the billbacks previously. The system was now automatically deducting tens of millions of dollars each month! It was performing the "black & white" transactions flawlessly and was doing just as it was told. However, the term GIGO (Garbage-In/Garbage-Out) may apply here. Every time a bad piece of information (incorrect date or amount) was entered into the system, the billback was understated. There were also many "gray area" situations where the billback was still due but for whatever legitimate reason it fell outside of the strict date parameters. Subsequently, many billbacks were not processed fully or at all. The auditors were able to analyze each promotion and recover millions of dollars that had literally "slipped through the cracks".