SEB Group’s Finance Department appointed Runview to conduct an audit of its accounts payable, as it was aware errors might persist despite its internal procedures designed to prevent and check for irregularities. Reassured by the analysis findings, the staff appreciated the independence of the consultants and the ease with which the whole procedure ran. Besides the cash recovered and the information provided by the findings, the Purchasing Department sees the exercise as recognising its professionalism.
Trusting your business’ accounting does not necessarily entail a lack of awareness of its limitations. Consequently, with a view to measuring and fixing anything that might slip through the net of measures designed to prevent and check for irregularities, SEB Group decided to appoint Runview to conduct an accounts payable audit. “We knew that we had the processes under control overall, but that there could be risks,” explains Frédéric Just, International Finance Auditor at SEB Group. Alongside Isabelle Herbet, Head of Indirect Purchasing, he reviewed the experience during a webinar organised by France’s national procurement trade body, the Conseil National des Achats (video in French).
The world’s leading manufacturer of household electrical appliances, this French group based in Ecully near Lyon now operates in some 150 countries, and has a portfolio of 31 brands, including SEB, Rowenta, Moulinex and Calor. It employs 34,000 people worldwide and runs 41 production sites, 11 of which are in France. It generated revenue of €6.9 billion in 2020.
The Group’s accounting is organised across a number of shared service centres (SSC), one in France and the rest elsewhere, handling the accounting for about twenty companies, using the SAP ERP system. The SSC deals with a huge volume of transactions, covering annual purchases of €4.2 billion from 36,000 suppliers.
A wish to test the robustness of internal processes
Contacted by Runview in 2020, SEB Group’s Finance Department decided the time was right to run an audit of its accounts payable, also called Profit Recovery audit. “It was an opportune moment to see how robust our purchase-to-pay processes were,” Frédéric Just recalls. Given the volume of transactions processed, the existence of several companies in the Group, and the mixture of digitalisation tools used (including Optical Character Recognition and scans), the teams were aware that there would definitely be some irregularities.
“We were not starting from square one,” adds Frédéric Just, who is responsible for accounting methods and internal audit. The SSC follows SAP’s standards to avoid duplicates, for example. The Group’s internal audit department also runs an analysis using ACL software once a year to find any potential over-payments. “But we were aware of the limitations of these methods. In SAP, warnings do not necessarily prevent users from continuing, for example. In addition, this inspection is not Group-wide, it only involves one company, and you cannot cross-check across different financial years,” he explains. The Purchasing Department was also interested in an audit of accounts payable. “This approach underlines our professionalism towards suppliers and helps develop our supplier relationship management. In addition, the amounts recovered are included in the Indirect Purchasing Department’s performance,” Isabelle Herbert points out.
Runview was consequently appointed to conduct a first audit in October 2020. It concerned 11 business units, companies on the French market, and entailed examining overlooked input VAT over two financial years, i.e., an audit of more than 700,000 accounts entries and €440m in VAT. “In the light of the results, we wanted to extend the investigation to foreign companies using the SSC and broaden the scope to include not only errors in accounting for VAT, but also duplicates,” Frédéric Just explains. A second assignment thus started in February 2021, this time spanning 17 business units, some outside France, and some 2 million accounts entries.
Very small workload for in-house teams
The first stage of the Profit Recovery audit was sending Runview consultants the accounting data they were going to examine. “It can take some time if you are not used to extracting this kind of data from SAP, but from a certain size onwards, these are known and recurrent jobs. We already provide these tables for tax inspections and auditors,” the International Finance Auditor reiterates. Runview then began a comprehensive analysis of the data using its proprietary data mining and artificial intelligence software, to identify potential errors.
The next phase entailed Runview visiting the client to collect copies of the invoices relevant to the potential irregularities they had found. “We provided them with PCs, and I needed to send a few additional invoices, but the bulk of the work is done by the consultants. We were called upon relatively little,” Frédéric Just adds.
Then came the ratification stage. The findings of the various analyses were presented to SEB Group teams using Runview’s secure platform, the Exaus© client portal, which can be used for real-time reporting and ratification by providing all the necessary information. “The portal is easy to use. In our case, the work took very little of our time, which had been one of the Finance Department’s fears as regards this audit,” Just reports approvingly. “It is a highly intuitive portal to use,” confirms Isabelle Herbet.
Effective circularisation exercises dispelled teams' fears
At the same time, Runview also conducted circularisation exercises with 46 suppliers. “I was apprehensive about this process,” the head of Indirect Purchasing acknowledges. “I feared that it might have a negative impact on our relationships with suppliers. But I soon realised, on the basis of some initial feedback, that Runview’s highly professional and transparent approach would ultimately make those relationships stronger. In fact, having thorough accounting procedures enhances SEB Group’s professionalism, which comforts and reassures our suppliers. The results also provide us with relevant insights, whether regarding a purchasing category and/or supplier, and offer potential areas for continuous improvement.” A specific team at Runview actually takes charge of identifying and contacting the relevant person working at each supplier, and issuing reminders, if necessary. This results in much higher response rate than when circularisation exercises are carried out by statutory auditors. In the case in point, 65% of third parties contacted replied, enabling SEB Group to amass €35,000 in credit notes.
Runview also takes charge of collecting reimbursements, keeping the Exaus© client portal constantly updated with the information in-house teams need to track the exercise’s progress and carry out the corresponding adjustments to the accounts.
In total, these audits enabled the household electrical appliance manufacturer to recover between €200,000 and €250,000. Considering the volumes concerned, these figures mean SEB Group’s accounting procedures are working very well, as the average amount for Runview clients is rather more in the region of €400,000 to €500,000. “We were very pleased with the low amount we collected, and view the whole process completely positively,” underlines Frédéric Just.
Complex VAT errors and duplicate entries
The bulk of this reassuring figure resulted from VAT irregularities. Runview’s experience shows that error rates can be higher in SSC outside France, as they can find it more difficult to take all the specific features of French VAT into consideration. The Profit Recovery audit also identified some supplier over-payments in France and elsewhere. The analysis conducted by Runview makes it possible to find complicated duplicates that slip through the net of the usual checks. This can happen when an invoice is recorded twice in the accounts, with the same information except for the dates, which have different years. Without in-depth examination, it is difficult to know whether it is a duplicate or a recurring annual bill. Runview’s algorithms can also identify duplicates caused by entering invoices twice with different supplier names, which can happen if one company has more than one entry in a supplier database. The algorithms also spot over-payments resulting from errors in entering invoice numbers, such as dropping or mistaking characters.
Besides the cash recovered, and confirmation that the processes are basically sound, the avenues for improvement opened by the findings unearthed by the analysis were of interest to SEB Group’s teams. “We are going to use these results to understand why these errors occur and to see what training needs to be put in place, and to identify the points that need to be emphasised to avoid them in the future,” says Frédéric Just. The head of Indirect Purchasing shares this point of view. “The information provided allows us to refine our assessment of the maturity and risk of certain categories of purchases or suppliers, and to incorporate these factors in building our future strategies,” Isabelle Herbet consequently explains. To anticipate the appearance of new errors, and check that lessons from previous audits have been properly learned, best practice suggests running further audits every two years.
Isabelle Herbet, SEB Group Head of Indirect Purchasing
The audit verified the robustness of our internal processes, demonstrated our professionalism, and strengthened our relationships with our suppliers, all delivering an impact on the bottom line.
At this point, both managers offer a very positive assessment of the Profit Recovery audits conducted by Runview. “It is an easy process to implement, with transparency about progress and findings, and no cost commitment,” lists the Head of Indirect Purchasing. As Runview is paid for audits on a success fee basis, no budget is needed beforehand. The audit is therefore win-win: “The audit verified the robustness of our internal processes, demonstrated our professionalism and strengthened our relationships with our suppliers, all delivering an impact on the bottom line,” she continues. From a more operational perspective, Frédéric Just was pleased about the “low workload on in-house teams”, the “independence of the consultants”, the “ease of communication” and Runview’s responsiveness.
About the author
Diplômé de Institut Mines-Télécom Business School (IMT-BS), Bastien a rejoint Runview en 2017 pour créer l’équipe Marketing après plusieurs postes de Responsable Marketing chez des opérateurs télécoms et éditeurs de logiciels.All the author's articles