“Identify the source of failings, so as to subsequently put the right procedures in place”. Marc Fournier, head of financial accounting and reporting at Novartis Pharma, sees that as the objective of the accounts payable audits conducted by Runview at Novartis for the last few years.
A leading firm in the pharmaceuticals industry, and France’s top laboratory, the company’s main business is patient healthcare and well-being, and supporting services. Novartis has three divisions in France. Innovative Medicines, comprising Novartis Pharmaceuticals and Oncology, focuses on branded medicinal products. Sandoz produces generic and biosimilar medicinal products. Lastly, Alcon specialises in eye care. The group also runs a biotechnology arm in France, and it employs a total of 5,000 people. It generated revenue of €2.25 billion in 2016.
Like many companies, Novartis Pharma has decided to outsource and transfer part of its accounting function to a partner based abroad. “I joined in 2010, about a year after this transfer, and I noticed there were not only some organisational shortcomings, but also issues with the quality of accounting information. For example, we had cases of double payment of invoices, and situations where input VAT was not claimed back when it should have been,” Marc Fournier reports.
Such irregularities are obstacles to optimum use of the company’s resources. The head of accounting therefore decided to have an audit run. “Novartis is seeking to devote maximum resources to serving patients and, like any well-managed company, it endeavours to identify shortcomings in order to improve,” he explains.
The group therefore looked for a provider to help it identify failings and explain their origins, and launched a request for proposals. Of the four bidders, Runview, the specialist in recovery audits and accounting data exploration, was selected. “Runview fully met our specification and conveyed the desire to really work together with no extreme measures that might push our company to take risks,” Fournier says.
Runview consequently conducted its first audit for Novartis Pharma in 2010, covering the years 2007 to 2009. Satisfied with Runview’s work, Novartis then extended the audit to other entities within the group. Further audits were conducted in 2013 and 2016.
During each assignment, Runview started by collecting extracts from Novartis’ accounting records. At Runview’s own offices, these files were comprehensively analysed to detect potential errors, using software developed in-house. These potential errors were then examined by Runview’s consultants, who continued their investigations by examining the corresponding supplier invoices, ultimately producing a summary dashboard and an itemised list of all the errors found.
Novartis employees then took over, ratifying the list of errors and indicating whether the money was to be recovered and whether Runview was to take charge of that recovery. “They do not force our hand, which we appreciate. We are definitely working in partnership,” Marc Fournier comments. Depending on the company’s instructions, Runview then takes charge of recovering the money owed from suppliers as a consequence of double payments, while Novartis itself submits the claims to recover overlooked input VAT.
Marc Fournier, head of financial accounting and reporting at Novartis Pharma
The audit was very positive because it enabled us to recover substantial, high impact amounts.
“The audit was very positive because it enabled us to find substantial, high impact amounts,” is Marc Fournier’s approving assessment. From the first audit, Runview’s report identified a number of irregularities, with some double payments but also invoices improperly recorded and, for example, accounting errors involving a shipping agent’s invoices and customs clearance on goods. “That was an issue with transferring knowledge to our service provider, which we have since resolved. All concerned are now very much on guard on that particular point,” Fournier explains.
Using the information provided by Runview during the first audit, Novartis was in a position to make the necessary adjustments in-house to eliminate certain errors. The amounts collected as a result of the two subsequent audits were therefore naturally smaller.
Over and above the financial benefits, the group’s accounting managers appreciated the working methods and independence of Runview staff. “I was surprised to note the audit did not necessarily mean extra workload for in-house staff. The various stages actually took a relatively short time from start to finish, the dialogue between us and Runview was very efficient, and not at all time-consuming for us,” says Audrey Coullet, head of accounts payable, who closely monitored the audit conducted in 2016.
Other source of satisfaction is the quality of the documentation produced by Runview. “The file tracking the various errors was very accurate and useful, with full information on each of the errors and links making it possible to open the relevant invoice in one click,” Coullet explains. Marc Fournier also welcomes this clarity. “In cases where input VAT had mistakenly not been claimed, Runview gave us very clear records with full details documenting the accounts entries. I have no concerns regarding our ability to track back to the origin of the problem in the event of a tax inspection,” he adds.
Runview’s tact and communication skills are also highlighted by Novartis’ accounting managers. These are much-needed qualities for calm dialogue with different departments in the group, such as IT or purchasing, and with suppliers. “Collection of disputed amounts owing to double payments was carried out politely and professionally,” Marc Fournier reports.
Novartis’ overall assessment is therefore very positive, and the firm intends to continue to hold regular audits of its accounts payable. “It is essential, in my view,” says the head of financial accounting, pointing out two risk factors. “The first is linked to the transfer of certain tasks to the shared accounting services centre, where there could be high staff turnover and perhaps rough-and-ready procedures,” he explains. “The second is in-house because, like any large company, we are sometimes forced to entrust accounting work to people who are not accountants and who could involuntarily be the source of mistakes.”
With hundreds of invoices received daily in each of the firm’s divisions, accounting staff cannot check each accounts entry individually. Runview’s systems can, however, perform these comprehensive checks. “As the procedure does not take up undue amounts of in-house employees’ time, companies have everything to gain,” is Audrey Coullet’s conclusion.
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