But what do we mean by line-by-line. Well this brings us back full circle to the beginning. I’m still discussing with that head of internal audit in one of the world’s largest retail groups. And he still is not understanding why he needs data analytics. Ok, so why not?
Well, because his managers are using detailed reports, that show the total balances day-by-day for their suppliers. Ok. But, I say to him, within those totals, what if there is a transaction that is hiding. For example, imagine that you owe your supplier, that happens to be one of the world’s leading distributors of cosmetics, 10 million USD. Ok, its normal, you always owe them about that much, because they are always delivery to you, and you are always paying them after 60 days. Everything is fine from that perspective.
But little did you know, that within that outstanding balance of 10 million, lurks a year-end-rebate transaction. It was entered three years ago. IT means that that friendly supplier, should pay you back 1 million USD according to the contract that your purchasing team dutifully negotiated for you. But you don’t notice it. Because it is hidden within the 10 million. Its like this. Actually, you owe them 11 million, and they owe your 1 million. So the balance is 10 million. So your auditors think, well, we owe them 10 million, which is the same as last month, so everything is good, end of story. Unfortunately for your company, you don’t get to reclaim your 1 million back from them.