Covivio: using accounts payable audits to drive continuous improvement

To identify any residual irregularities lingering within its accounting records despite internal audits and robust procedures, property investment company Covivio makes regular use of Runview’s skills. The audits conducted have proved useful, firstly in recovering amounts wrongly paid and claiming back overlooked input VAT, and secondly in using the exercise to identify where there is room for improvement. As well as their expertise, the consultants’ interpersonal skills helped to secure employees’ buy-in to the audits.

“We have been working with Runview for nine years, and they have been producing results for nine years,” observes Hubert Lasseron, Internal Auditor at Covivio. A level of performance that explains why, after appointing it for an initial audit of its accounts payable, considered at the time likely to be a one-off, the property firm has continued to make regular use of Runview’s services.

A real estate investment trust company, listed on the Paris and Milan stock exchanges, Covivio is a leading name in property in Europe, where it manages €26 billion in assets. Those assets comprise offices, housing and hotels, located in France, where the company has its head office, Germany, Italy and various European cities. The firm generated rental income of €609 million in 2020, and employs around 1,000 people.

Accounting is handled in-house: in France for the consolidated accounting for Europe as a whole, and by accounting teams in various countries to locally produce the accounts for the some 416 companies making up Covivio. Its business activities mean that Covivio follows specific VAT rules, with some transactions where VAT is deductible and others where it is not.

Hubert Lasseron, Internal Auditor at Covivio

I think Runview has remarkable and comprehensive expertise in double payments.

The original issue: potential double payments

Despite this particular VAT set-up, Covivio first contacted Runview because it was wondering whether it was making any double payments. “Under our annual audit plan for 2012, we wanted to conduct an audit to check that we were not paying the same invoices twice,” Hubert Lasseron recalls.

A number of factors worked in favour of selecting Runview to run the audit. “I think Runview has remarkable and comprehensive expertise in double payments,” he explains, stressing the quality and potency of the analysis conducted. “Their consultants are able to use various criteria such as the supplier’s name, amount or date, to find invoices paid twice, not only by one company but also by different companies, which the anti-duplication modules in our payment applications are not able to spot,” he offers by way of an example. The comprehensive nature of the service offered, including collecting reimbursements, also helped convince him. “We don’t have the people in-house to do that,” he points out. He also appreciates the Runview business model based on success fees. “If they find irregularities, we share the money reimbursed. The arrangement can only be of benefit to Covivio.”

Repeat performance

The results obtained induced Covivio to repeat the audits regularly, for both supplier over-payments and for overlooked input VAT, in France, Italy and Germany. “We have analysed the errors, and we are improving year-on-year, as are our applications, but we are not able to reach Runview’s level of expertise or performance. Moreover, people change, as do the processes and the property assets in question, so for all these reasons, double payments continue to occur,” Hubert Lasseron believes. Covivio therefore uses Runview’s audits with two viewpoints in mind, namely short-term recovery of money the business should not have paid out, and long-term improvements to procedures. “We are discovering where our duplicates and VAT mistakes arise, and we are learning to work better,” explains the internal auditor.

Each Runview assignment follows the same process. After signing the contract, Covivio supplies accounting records data to Runview consultants. “We extract accounting files for the companies and financial periods concerned and we transfer them to Runview’s databases. We also provide their consultants with access to our applications, so they can check scans of our invoices,” Lasseron explains. After analysis, the list of potential irregularities uncovered is sent to Covivio for ratification. “Runview does the work on collecting reimbursements for double payments, and we recover overlooked input VAT from previous periods via the month-end VAT return,” Lasseron continues.

Systems and people

Information is passed between Runview consultants and Covivio employees over a secure platform. “It is very well put together,” the internal auditor points out. He also particularly appreciates the quality of the reports provided as assignments progress. “There are some former statutory auditors working at Runview and they are able to provide very well-presented reports. The slides they supply are a real bonus for us,” he says approvingly, while also highlighting the consultants’ interpersonal skills, which he sees as very important for a successful audit process.

While these assignments obviously require the consultants to point out mistakes and shortcomings, “They know how to talk to accountants and work with them without being overbearing or antagonising them. Whereas with other service providers, the situation can lead to clashes, everything runs smoothly with Runview,” he says. This tact is also used with Covivio’s suppliers, approached by Runview consultants to conduct the circularisation exercises intended to pinpoint any unused credit notes.

Complex duplicates and special VAT schemes

In terms of results, while the amounts recovered are smaller than they were at the beginning, the audits are still useful, according to Lasseron. They also serve to uncover overpayments that are not simply double payments and which consequently slip through the checks put in place. “Our suppliers include Agence France Presse, called AFP in our database, and another company with the same initials. For a while, the latter was receiving payments intended for the former, and when AFP the news agency sent reminders, we paid them too. We were therefore paying the same invoice twice to two different companies,” the internal auditor recalls.

“As regards VAT, Runview’s audits are even more productive because they make it possible to correct an error and to avoid it happening again in future,” Lasseron says appreciatively, noting Runview’s in-depth expertise in tax matters. Covivio has consequently been able to permanently correct a number of irregularities. “On insurance invoices, VAT cannot be refunded. On the other hand, the VAT charged by a broker when it bills you for insurance premium can be claimed back. We had overlooked doing so for this input VAT,” illustrates Lasseron by way of an example.

Fostering continuous improvement

“We use these audits to foster our continuous improvement across all our accounting procedures and applications,” he continues. The anti-duplication modules in management software have been enhanced, and a dual-signature procedure should prevent double payments. Accountants have been trained on certain aspects of claimable VAT, and staff are encouraged not to proceed with payment on receipt of a reminder with checking first.

While convinced that achieving zero irregularities is a pipe dream, Lasseron is very much interested in the various options that can be used to find them. He is therefore able to determine the strengths of Runview’s audits compared with alternative solutions. “The market trend is towards reliance on specialist software, but we have run some tests and such systems are time-consuming for us and less effective than using Runview,” he finds. “The Runview methodology, based on data mining technology combined with human analysis by the consultants, is the reason behind the audits’ impressive results,” Hubert Lasseron believes.

In his view, this human component to the analysis, by virtue of its scale and depth, supplements the work done by the statutory auditors. “They do circularisation exercises, but only maybe ten or so, and they concentrate on banks, whereas Runview does about a hundred of them,” he says. Lastly, the consultants have managed to win the trust of in-house staff. “They have earned their spurs through the quality of their analysis and are viewed as legitimate because they provide expertise that we do not have in-house,” Lasseron concludes. Just some of the reasons why the contract with Runview to find double payments and overlooked input VAT is renewed every year.