Runview reveals what Bayer’s accounting entries show

Already possessing sound internal audit procedures, Bayer found Runview’s audit to be an additional route to pinpointing anomalies, and emphasises the independent way in which Runview consultants work, and the usefulness of the online interchange platform used.

The Fichier des Écritures Comptables (FEC), production of which is a statutory requirement in France for tax purposes, can also serve as a means to improve business performance. It was this angle that convinced Bayer’s teams to appoint Runview to conduct an audit of its accounts payable in 2019.

Specialising in life sciences, Bayer’s French business units include Bayer SAS and Bayer Healthcare SAS. The former develops plant health products; the latter consists of three divisions:

• Pharmaceuticals develops healthcare treatments;
• Consumer Health is non-prescription health and medicinal products;
• Animal Health, the veterinary arm, is currently being sold off.

Between them, Bayer SAS and Bayer Healthcare SAS generated turnover of €2.5 billion and employed around 3,000 people in France in 2019. They both have several R&D sites as well as production plants. The administrative functions are based in La Garenne-Colombes, Loos, and northwest Lyon.

Offshored accounting function

The Lyon site is home to the accounting team (among others), comprising some fifteen people tasked with supervising the group’s various shared services centres (SSC). “The offshoring started in 2003,” explains Patrick Gouinaud, Head of Transaction Processes for this accounting department. The transaction aspect of accounting procedures, then the cost and management accounting aspects, were first transferred to an SSC based in Barcelona. “Two years ago, a further step was taken when some of the accounting function was transferred to an SSC in Manila, which is now tasked with data entry and receipts,” Gouinaud says. In addition, another SSC in Poland is in charge of certain specific technical tasks.

The first contact between Bayer and Runview dates back to 2014, although it did not culminate in a Runview audit being conducted. Five years later, the two companies talked again, this time resulting in Runview being appointed to run an audit. “Although we have very good internal processes, we realised that this audit could nonetheless be a useful addition,” Céline Lerissel explains.

The clincher: analysing the FEC file

However, it was the fact Runview’s service is based on using the FEC file that finally convinced Bayer. “We were interested in the idea of using the FEC data for quantitative and qualitative analyses. Instead of producing it solely as an accounting obligation, it is used as a tool to serve the company,” says Céline Lerissel. Bayer were still cautious, however. “We had doubts that the FEC would reveal anything significant, not without involving our staff in deeper analyses,” she recalls. As their internal audits were already comprehensive, Bayer also wondered whether the audit would really be able to provide any relevant findings. “But we said to ourselves that we were risking nothing by taking a look,” Patrick Gouinaud reasons.

Therefore, in 2019, Runview conducted an accounts payable recovery audit on Bayer SAS and Bayer Healthcare SAS. The assignment entailed an analysis of financial years 2014 to 2018 for supplier overpayments, and on overlooked input VAT for the years 2016 to 2018.

“Our first discussions concerned approving audit-related use of the FEC, then we sent the files to Runview’s team,” Céline Lerissel recalls. The consultants also used workstations on Bayer’s site in La Garenne-Colombes so as to be able to access the two companies’ ERP system, which happens to be SAP. As the key Runview contacts (Céline Lerissel for VAT, and Patrick Gouinaud for supplier overpayments) are based in Lyon, subsequent discussions took place remotely, and Runview’s consultants worked independently. This way of organising work is particularly important in the wake of the Coronavirus situation, which has fundamentally changed working methods and put remote working centre stage, where it is likely to remain post-crisis.

A comprehensive interchange platform

Runview consultants analysed Bayer’s accounts records using using their data mining and artificial intelligence software. Anomalies identified were then confirmed by checking the supporting documentation for the entries in question, and the findings sent to the Bayer contacts for ratification, using the Exaus® Client Portal platform. “At first sight, it looks fairly complicated, but it is comprehensive. Every time, all the documentation needed to check and ratify the discrepancies found was there,” Patrick Gouinaud reports approvingly. “This system is a revelation,” enthuses Céline Lerissel. “It gave me a complete picture of all the invoices, with the VAT figures identified by Runview, plus a link to view the invoice as a PDF. I was also able to extract all the accounting entries relating to the anomalies found into an Excel file, where I could rework the data using pivot tables on my own computer.”

The Runview team undertook debt collection and also conducted circularisations with a number of Bayer’s suppliers, while the overlooked input VAT was recovered directly by Bayer. The audit was wrapped up in the spring of 2020 with a review meeting and presentation of the final audit report, including details of the overlooked recoverable input VAT given by invoice type and by company. The report was all the more welcome as the audit confirmed the robustness of the processes Bayer follows. “In view of the number of transactions we handle, there is not much room for improvement,” Patrick Gouinaud believes.

Process quality confirmed

In terms of overpayments, analysis showed they were mainly the result of very occasional human error. They were therefore just lingering anomalies, difficult to prevent, which confirmed the basic reliability of the processes at work. “You can implement as many checks as you like, but if there is an error when originally entering the invoice, you only detect it after the event,” the Head of Transaction Processes reiterates. “The circularisation exercise conducted by Runview also pinpointed a number of unused credit notes,” he reports approvingly. The analysis found a total of €142,000 in supplier overpayments.

As regards VAT, €210,000 of overlooked recoverable input VAT was found. “This allowed us to spot some categories of invoices where we had failed to identify deductible VAT”, explains Céline Lerissel, mentioning the example of travel agent invoices, where VAT was not stated separately. “I forwarded this information to the Barcelona SSC and we strengthened our process audits as a result,” she continues, saying she plans to circulate all the areas for improvement drawn from the Runview audit to employees.

Céline Lerissel, Tax manager at Bayer

Although our internal audit function is very efficient, to err is human. It is therefore still useful to have an external firm’s view of our accounting.

Highly independent audit team

Bayer were ultimately completely satisfied with the audit. “Working with Runview’s consultants went really very well, they are very responsive, conscientious, professional and they instigate some excellent proposals,” the Tax Manager concludes. “I found them highly independent. We did not have to provide much, just ratify a few things. They had no questions about how to use the ERP system,” Patrick Gouinaud says.

Other assignments could very well follow. “Although our internal audit function is very efficient, to err is human. It is therefore still useful to have an external firm’s view of our accounting. We realised that it is a way of checking our processes and recovering cash quickly, without putting undue pressure on our teams. It is to our advantage to use Runview,” confirms Céline Lerissel.