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PKF Australia

Accountants and Business Advisers

Forensic Cost Reviews

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David Morgan

Principal

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Forensic Cost Reviews

PKF Forensic and Risk Services have developed a series of products designed to either generate additional revenue or detect hidden costs in a business that often stem from poor processes, maladministration or fraud. These costs generally become and remain hidden when company staff, systems and procedures are upgraded or streamlined and responsibilities change.

With these changes come mistakes, new weaknesses (and therefore opportunities for fraud to occur) in a company’s control environment and a wealth of information that is not analysed for productivity opportunities.

The methodology involves PKF personnel understanding the client’s business in significant detail. This captures granular analysis at a transactional level of the business by asking the right questions to fully understand the commercial context of a transaction and where additional value could be obtained. PKF Forensics’ breadth of experience helps them design reviews for clients that perhaps other advisors had not thought of.

For example, our team conducted a forensic cost review across an organisation’s contractor spend. We identified the same contractor was charging different machinery rates, for the same type of equipment across different business units. This was identified because the organisation restructured from a de-centralised to centralised procurement framework. We analysed granular contractor spend shortly after the restructure and helped our client identify some ‘quick wins’, including the cost discrepancy.

In another case, a client in the retail industry came to us as the royalty payments were less than expected for the franchise business of that size and in that location. We visited the store and further understood the operations, which included how they packaged the product. We were then able to analyse the volume of packaging used in the previously reported period and the revenue that it should have generated. It became apparent that they had generated significantly more revenue than had been disclosed to the franchisor.

In a third case study, PKF Forensic and Risk Services performed analysis on one of our client’s POS data to help them understand their product sales patterns in every store across a four-year period. We extracted and collated various sales reports from the POS system. This yielded their top selling product items and sale patterns during a day, to help our client understand their customer profile and what they were purchasing. This enabled our client to enhance their decision making around required inventory levels and staff

In conclusion, a granular forensic approach is often required to identify the above opportunities or anomalies. Having an expert that will ask the right questions, create and deliver an appropriate approach and subsequently help the business either know where additional revenue can be generated or identify the hidden costs can lead to a valuable outcome for the client.

Contact Forensic and Risk Services for further information.

 


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