Cost Recovery – For Your Bank and Your Customers

Cost Recovery – For Your Bank and Your Customers

COVID-19 has shaken up business as usual in all sectors, including banking and financial services. Finding ways to cut costs and increase cash on hand are top of mind for many banks and other businesses right now. Fees and cash have been low for banks since interest rates were cut by the Fed in March 2020, which is leading many financial institutions to seek alternative ways to help their bottom line.

A cost recovery audit is just one tool that can be used to help with immediate liquidity needs. They can refund payments or credits directly to the bottom line, ensuring judicious use of your resources. Reviewing specific areas of spend, as described below, may reveal savings opportunities and potentially even refunds for expenses paid in error.

As a relationship bank, cost recovery can add tremendous value to your business clients as well. It can help keep a profitable company in the black or perhaps create cash for a non-profitable client, which may help keep your loan current. Best of all, of course, what you pay for this service can either be an agreed-upon fee or a contingency fee. A contingency fee takes the risk out of the process because there is nothing owed if savings are not uncovered.

Where to Identify Potential Cost Savings

The cost recovery audit process involves a third-party review of contracts, accounts, invoices and other related documentation to determine if your vendors are billing properly and that your organization is not paying for unnecessary service or duplicate billings. If a discrepancy is found, your organization can work with a cost recovery audit team and applicable service providers to recover any overpayments and potentially optimize vendor or customer contracts with accurate fees, usage and billing rates. A few key areas for review include:

Accounts Payable

Financial waste in accounts payable generally falls into two buckets – overspend and payment areas. Reviews of your disbursements can identify if your organization made duplicate payments to vendors, did not apply credit memos or missed rebates and other potential cost-savings opportunities.

Recovery opportunities in payment areas generally involve:

  • Duplicate payments
  • Wrong vendor payments
  • Pricing errors
  • Missed discounts or rebates
  • Unrecorded purchase returns
  • Unnecessary escheatment

Telecommunications

Comprehensive reviews of telephone, Datacom and wireless services may help optimize usage, contracts and related expenses.

Core Service Providers

As a key element of banking service, reviewing contracts and fees of core service providers may provide valuable insight. Long-term contracts with termination penalties, per item charges for all transactions (e.g., check clearing, stop payments, daily reports and many others) are prime areas for review.

Common Area Maintenance and Lease

Reviews of your lease documents helps ensure your charges and other lease costs, such as base year calculations or pro-rata share are appropriately allocated.

Parcel Shipping

Thorough reviews of your parcel shipping and freight costs can reveal the possibility of overcharges and opportunity for refunds, but it can also provide opportunities to improve the management of your shipping function. For example, as part of a cost recovery review, it is generally recommended to automate the general ledger coding of carrier charges and the cost center allocation process, which provides greater visibility into total parcel spend. You may find, for example, that certain shipments can be packaged in a more cost-efficient way.

Software Licensing

The benefits of software licensing reviews are threefold – one, they help ensure compliance with licensing terms; two, they can reveal whether your organization makes use of all the licenses it holds; and three, a closer look may reveal less-than-optimal terms for your arrangement. The audit of software licenses reduces your risk of contractual breach while optimizing your licensing arrangement and spend.

Unclaimed Property

While unclaimed property is frequently a tax reporting function, a closer look at your records may uncover assets that vendors have paid you that are currently being held by federal, state or local government agencies.

Additional Resources

  • How to Cut Unnecessary Costs During COVID-19 (CBIZ article available here)
  • Why some banks are aggressively cutting costs and others aren’t (ABA article available here)

To Learn More

For more information on the cost recovery process, visit our website, contact your CBIZ advisor or connect with Frank Campagna, Managing Director, CBIZ Risk & Advisory Services at (216) 525-1989 or fcampagna@cbiz.com. You will also find additional resources on COVID-19’s impact on your organization and your recovery through our Accelerated Recovery Resource Center

Cost Recovery – For Your Bank and Your Customers https://www.cbiz.com/Portals/0/BFS Docs/Cost Recovery.jpg?ver=2020-12-14-151700-147COVID-19 has shaken up business as usual in all sectors, including banking and financial services. Finding ways to cut costs and increase cash on hand are top of mind for many banks and other businesses right now. 2020-12-14T20:00:00-05:00COVID-19 has shaken up business as usual in all sectors, including banking and financial services. Finding ways to cut costs and increase cash on hand are top of mind for many banks and other businesses right now. Risk MitigationFinancial InstitutionsCost Recovery SolutionsAccelerated RecoveryNo