Why You Should Audit Construction Spend

What are construction audits, and why do they matter for high-volume companies like our Fortune 500 clients? Tyler VanWormer discusses the profitability and applications of this specialized accounts payable recovery audit.

Why Every Company Should Audit Construction Spend

What is a Construction Audit?

A construction audit is a specialized recovery audit service.  The key: diving deep into the many layers of background documents resulting from a new build. This type of recovery auditing service takes a fine-toothed comb to the bulky and overwhelming amount of data sent to your organization from vendors and contractors throughout the duration of the building project.

How is a Construction Audit Different from a Recovery Audit?

This type of recovery audit goes beyond auditing your accounts payable. Your firm will dive deep into the vast and varied records that result from any construction project from contractors and subcontractors at every level. These include timesheets, work orders, expense reports, and lots of line-item data that typically wouldn’t be analyzed so closely. The sheer volume of this line-item data from a construction project can be overwhelming, and many companies find it difficult to routinely scrub it for accuracy, resulting in overpayments and lost profits.

Benefits of a Construction Audit for Fortune 500 Companies

Construction is typically a very large spend category, with annual expenditures in the millions to tens of millions of dollars. In addition to the direct costs of labor and material, construction vendors bill for many other categories for which controls are not always in place. From unapproved incidental expenses to the misapplication of management fees and the treatment of excess inventory post-project, there are many areas in which profit leakage can be occurring.

These areas are typically not outlined on construction invoices, requiring a deep dive into many layers of background documents, including timesheets, work orders and expense reports. If the audit places. significant burden on internal departments, your organization may want to consider enlisting the services of a third-party firm. AP Recovery’s Advisory Services team will work to ensure that all lost dollars are brought back to you, and that your invoices are brought into line.

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