Another example of a great piece of audit work by Oliver Ansell in our sales audit team, this time on Nisa which resulted in £23k benefit for our client:
The auditor identified a number of claims relating to the 2020 trading year, a particularly good effort given Nisa do not have EPOS data, but instead have ‘Sales Out’ data only – which is the sales from Nisa to their own stores. This means there is no average selling price information, meaning promotions cannot be reconciled. The only way a NAM can validate the promotional activity is by physically visiting a store to check!
Despite this, the auditor was able to identify and get agreed the following claim types:
- Incorrect retro: The supplier agreed to one retro for a £1.25 promotion and then a larger retro for a £1 promotion (to match the bigger giveaway). While reviewing, the auditor noticed a promotion where the supplier agreed to fund a £1.25 promotion but the retro for a £1 promotion was invoiced.
The claim was realised because Ollie reviewed the email archive and found the specific agreement for the £1.25 promo with the lower retro.
- Unagreed promo: A promotion ran on four variants of product and all four were billed with retro funding. When the auditor reviewed the proposal forms and email archive, he could only identify agreement to fund 3 of the four variants, leading to a claim on for all of the funding paid on the other variant, which Nisa agreed and re-paid in full
- Unagreed promo: Promo funding invoices were raised for a product, however no agreement from pladis to fund the promo were identified. Nisa tried to refute the claim by providing an email Nisa sent to the NAM confirming what products were going on promotion in the relevant period which included this product. However, Nisa were unable to provide the agreement to fund the invoiced retro and the claim amount was repaid in full.
Key takeaways:
- On the first claim, if a £1 promotion did run then it’s likely the supplier would have been successful, or willing to challenge simply from a commercial point. Nisa would have argued: ‘we ran a deeper promotion but only invoiced at the same retro rate as you’ve funded other £1 promos’. But when we reconcile and claim on an evidence basis, we were able to recover £11k from the Retailer.
- On the last two claims, again if the supplier wanted to challenge these in the commercial arena, it’s highly likely that they would be withdrawn, as Nisa would likely have reverted to say ‘the products went on promotion, you had increased sales – what’s the issue?’. Again, Salitix are able to manage this dialogue within a finance /audit channel and present an evidence based reconciliation, generating a £20k+ benefit to the supplier. This is precisely what the ‘best practice statement on forensic auditing’ is designed to ensure and facilitate. Bravo the GCA!
- In all of the examples, the presence of GSCOP and a code compliance officer are key in stopping the Retailer from making the claims ‘commercial’ as opposed to evidence based. The validation of the claim amounts led to no dialogue between account team at the supplier and the Nisa commercial teams.
The amounts are comparatively small, but in a tough marketplace with tight margins, who wants to forget the odd 20-30K here and there? No one! And this is one example of one trading year for one of the smaller Retailers… imagine what this looks like when you aggregate it across all your trading with all your customers!
