Vendor Payment Reconciliation

Background

Client outsourced the manufacturing of products to several contractors. As the client made changes to the Bill of Material of the products being constructed and as the cost of individual components fluctuated, variances developed in overall product cost between the time the product was ordered and when it was delivered.

Challenge

Changing product design, fluctuating component costs and complex contract terms for millions of orders combined with timing issues made the reconciliation of the amount owed a vendor vs. the amount invoiced an incredibly complex process taking many man months of effort. The client needed an audit process that would allow for the immediate reconciliation of billed vs. owed for each vendor involved in the contract manufacturing process.

Solution

ADC designed a repository of transition information and set of analytical tools to aid client financial analysts in the identification of cost variances between a vendors invoicing and the client's calculation of "should be" cost. The costs are based on the content, component cost and contract terms in effect at the time of goods receipt. The system also generates vendor variance and reconciliation reporting along an analytical interface that supports research into any variance discovered.

Results

The system has reduced the time and labor involved in the reconciliation process while boosting the reliability and accuracy of the audit information. The reports provide analysts with the exact cause of cost variances at the component level, providing data to reflect the contract costs, BOM and quantities involved in the makeup of a given part on any given date and time.