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Invalid CPG claims could be costing you a ton – what you need to know

Loosely defined claim audit standards applied without consistent rigor can result in overpayment of incentive claims, impacting the bottom-line financials. Think of it like this, approving a claim that “sort of” meets the standard leaves the manufacturer at risk if the claim requestor or other third party (including a government watchdog) objects to the auditing practices or the audit result.

The median percent of invalid deductions taken by customers was 5.1% – 10%, with nearly 40% reporting invalid deductions of 10% or more.

 
Claim Auditing Incentive Funds

Isolating invalid claims and either rejecting or correcting the claim has a tremendous financial impact.
Source: Attain Consulting Group

So, how do you assure that incentive funds are being rewarded based on sound rules and reliable auditing practices?

4 golden rules to follow

  1. Evaluate the claim audit rules
    What risk(s) are you trying to address? Do the claim audit requirements reduce that risk to an acceptable level? Are the rules explicit and without ambiguity? Who needs to approve the claim audit rules?
  1. Apply claim auditing “best practices”
    1. As obvious as this seems, claim audit rules must be documented and versioned to identify the relevant period covered by the rules. (Tribal knowledge is irrelevant to claim auditing.)
    2. Prepare the audit team. Hire professionals with good decision-making and communication skills. Train them (don’t just hand-over the audit rules). If claims are submitted in multiple languages, it may be best to outsource auditing to a firm who provides native language auditing services. (Avoid using Google Translate.)
    3. Isolate the auditing team from influencers who may attempt to circumvent audit requirements for preferred customers, sales representatives, program owners, etc. Assign the auditing task to Finance or Operations or consider outsourcing this important accountability to a third party whose claim auditing team members are skilled in providing competent and unbiased auditing services.
    4. Establish a QA protocol to monitor auditor compliance with the audit business rules and re-audit a percentage of claims. Use the re-audit to identify problematic claim audit rule language (ambiguity) or auditor re-training requirements.
    5. Implement a Service Level Agreement (SLA) with the audit team such that claims are audited in a timely manner to avoid diminishing customer satisfaction. (This is another good reason to consider outsourcing claim auditing to a firm who specializes in this service as the resources can flex according to claim volume peaks or troughs.)
    6. Commit to a regular review of claim audit guidelines with appropriate approvals for the upcoming period.
  1. Identify the claim audit escalation path We have seen up to 50% of claims submitted are rejected at first review. Most of the rejected claims are returned for correction. Because there are many cases that require escalation, an audit escalation path must be defined. Someone authorized to override the auditor’s findings is imperative otherwise money might be left on the table.
  1. Measure the claim audit results
    What is the average number of audits per approved claim? What is the count of rejected claims per customer? (Who is having difficulty submitting claims that can be approved first-touch?) Which type(s) of claim submissions are generating the most rejected claims? How are the results trending?
  • Use the metrics to refine the audit process and ask these questions:
  • •   Do the claim requirements need to be re-communicated?
  • •   Do the guidelines need to be clarified?
  • •   Is refresher training needed for the broad base or for specific customers?
  • •   Can the customer account managers assist?
  • •   Are temporary waivers needed to address a specific scenario while guidelines are updated?

 
Claim Auditing Incentive Funds

Sound claim auditing standards will improve your bottom line. Practices such as catching claims that should not be paid, when consistently applied, demonstrates that your organization is working toward a common claim standard across customers, geographies and business units. Last, don’t hesitate to seek the advice of a professional or third-party organization with claim auditing experience in foodservice or the B2B industry. Although you will eliminate costs by doing this internally, outsourcing is more efficient and will ultimately reduce your costs and standardize your process.

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