In our many years reviewing health system cash flow, we’ve found that returned goods are one of the largest areas of claims identified and recovered. Significant money may be lost during the return process, due to lack of proper communication between the Accounts Payable, Purchasing, and Receiving departments.
Ideally, a health system’s returns policy would require all departments to return items through the Receiving (or Shipping) department, with persistent follow up by Accounts Payable or Purchasing.
This back and forth communication is crucial to ensure no funds are lost. These communications should be properly documented, and departments should task one another the assignments, to create audit trails for internal reviews down the line.
We recently performed a Discovery Review for a medical center that returned product to Mentor Worldwide. These returns were spread over 17 purchase orders, which spanned over three years. After the returns were processed, the medical center never deducted the credits.
Due to the lack of communications between Accounts Payable and Purchasing at this medical center, neither department communicated who was accountable for follow-up with the vendor.
As a result, no department was tracking returns and available credits. After a review of the medical center’s procure-to-pay processes, TAG identified 22 open credit memo totaling $33,463 and no open invoices to pay. After contacting the vendor, we were able to recover the funds via a refund check to the medical center.
The solution to this medical centers problems was an effective Returned Goods Process. The Audit Group helped to document a new process and all involved departments were trained on the process.
Follow these tips for your Returned Goods Process:
If your organization is running into similar communication issues, it could be time for a process overhaul. The experts at The Audit Group will review your existing processes, and our findings will help you recover funds and develop sounder processes in the future. Contact us to get started.