Auditing the Final Inventory

This is the final post in a five-part series sharing common-sense strategies that have worked for other companies when they have moved on from rental contracts. Read our first post, and follow along with our series: Rental Laundry Programs, Understanding Program Responsibilities, and Managing Garment Inspection and Turn-In to learn more about each step.

You’ve collected, counted, and inspected the rental garments in your company’s system, and returned them to your rental provider.

Next, your provider will do their own audit, issuing a final buy-out invoice for every unreturned or damaged/abused garment.

Program managers who have been through this process all offer the same advice — do not pay the invoice at face value!

Experience has shown that, with some analysis and attention to detail, your company will be able to challenge some of the charges and negotiate a significantly reduced buy-out amount that is both fair and reasonable. Generally, there are two distinct components to verifying and auditing the buy-out inventory: (1) formatting the invoice so it can be electronically analyzed, and (2) performing the analysis.

1. Electronic Invoice Format

Most rental laundry program buy-out invoices are provided in a printed format, and may be hundreds of pages long.  They are generally expected to include (a) employee name, (b) the garment serial number (or route number/locker number) of all items that were not returned and any garments that were determined, through the provider’s inspection, to be damaged or abused, and (c) the fee associated with the deficiency.

To compare this invoice with the data obtained in your own collection audit, this invoice must be converted to digital format.  If the provider will supply this data digitally, there is no cost to convert.  If not, the data must either be converted by hand or via scan-to-database software programs that may be available for sale in the market.

The importance of requiring your provider to provide a copy of the buy-out invoice and/or a breakdown of the supplier’s evaluation in an Excel format cannot be overstated.

This will allow you to work with the data, comparing it your own audit (click here for details) completed as part of the garment collection process – and at no cost to you.

2. Performing the Analysis

Once you have the supplier’s evaluation data in a usable format, it’s time to get to work verifying the charges against your numbers (check out our post for a refresher). Here are some important steps to take as you review the invoice data:

• Confirm that the invoice matches the agreed upon prices and terms.
• Confirm that all employees that are on the invoice are still employed.
  • Do you have access to historical invoices, either from your archives or via supplier reprint? Convert this data to Excel format and use it to mine for rental charges accrued for terminated or retired employees through the rental period, which should have been long-since discontinued. Errors like these might be able to be established as credits against any lost items that are not returned.
• Are there ancillary items charged on the invoice which are not on the contract (outerwear, restroom supplies, floor mats, towels, etc.)?
• Damaged/abused garments:
  • How do garments invoiced as damaged/abused match up to your own evaluation? If you, or a designated company representative, were present for the supplier’s pickup of returned garments, do the totals for damaged garments on the invoice match the number of garments the supplier flagged as damaged during their initial review?
  • You should ask the rental laundry provider to deliver all items invoiced as damaged or abused back to your company in clean condition for further review.
    • Some companies have gone through this process and found that several garments originally charged as damaged/abused, were able to pass the standard for acceptable (not damaged) merchandise after cleaning.
    • If the provider can’t produce a garment they considered damaged, ask to have the invoice credited for that garment.
    • Compare damages/abuse to the supplier’s grading criteria (remember: requesting a copy of this criteria is an important step to take early in the process).
  • If they are charging you for a damaged garment they should return that garment to you to keep since you are paying for it. Experience has shown that some suppliers will attempt to bill for damaged garments but clean them up enough to put back in their inventory for hard-wear accounts.
• Lost garments:
  • Do the supplier’s totals match the totals from your own audit?
    • Make sure that 100% of returned garments were credited on the invoice.
    • Use your audit to verify or correct the supplier’s total, citing specific data from your audit.
    • Compare the supplier’s records for lost garments to your own employee database for potential duplicates.
  • If there are unreturned/lost garments, make certain that the vendor can prove your company – and which employee – lost them. This is a great example of why, as we saw in a previous post, it is so important to require the route driver count garments as they are checking them in and out for cleaning each week – especially in the weeks leading up to the final pick up.
  • Ask the vendor to prove that the employee lost the garments (have vendor show the pickup and delivery) before the accepting the charge.
  • If each garment was not being accounted for during each on-site pick-up and again at time of delivery, you may be able to negotiate such “lost” garment fees and not simply accept them as initially provided/proposed by the supplier.
• Pay special attention to the length of time lost or damaged garments were in service. Experience has shown that rental laundry programs almost never charge a depreciated amount for a lost or damaged garment – regardless of how used a garment was when first put into service within your program, or how long it was in use. This may be an important point of reconciling. Look closely at:
  • The age in-service for all garments categorized as damaged and abused. This establishes if these garments may have been categorized as worn-out and previously replaced at no-charge as part of the service agreement. Further, it is reasonable to offer a pro-rated amount – rather than a “replacement” charge at near or higher than full retail – for a garment that has been in service for several months versus a new garment.
  • The original condition (when they were placed in service) for any garments invoiced as damaged or abused. If a garment was used when placed in service, it is unlikely that it should be then re-invoiced as damaged or abused.

Careful accounting for all of this information will prepare you to reconcile your audit with the rental company’s. If, when you compare inventory information, you find discrepancies, don’t be afraid to point them out. You have every right to insist upon a fair and equitable settlement of any outstanding charges.

Planning your next move? Explore a flexible purchase program that minimizes costs while maximizing satisfaction, service, and compliance. Reach out to one of our National Account Executives serving your area today.