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Leaders In Payments
Leaders In Payments
Rich Schalabba, Founder & CEO of Payment Integrity Partners | Episode 315
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Unlock the secrets of protecting your company's bottom line with Rich Schalabba, the CEO of Payment Integrity Partners, as we dissect the crucial yet frequently ignored issue of financial leaks in the retail world. In our conversation, Rich peels back the layers of the payment landscape, revealing how his firm's cutting-edge technology and rigorous methods meticulously sift through mountains of transaction data to recover lost revenue for retailers. It's a masterclass in securing the financial fortitude of large organizations, ensuring that every penny is rightfully placed.
Learn how Payment Integrity Partners is changing the game in the recovery audit industry, boasting a distinctive blend of deep client connections, bespoke audits, and proprietary technology that outmatches the competition. Rich divulges how their rapid audit process is not merely about reclaiming funds but is a strategic move towards fortifying future financial practices.
Rich also shares his professional journey and the passion that led him to found Payment Integrity Partners. His personal narrative is one of entrepreneurial spirit and dedication to excellence in service, a testament to the company's success and the value they provide to their clients.
Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.
Speaker 2On average, retailers recover one-tenth of one percent of their sales every year in overpayments or under collections. This means that a retailer, say, with a $4 billion in sales revenue number, will lose on average $4 million a year. That would then be recovered by our work.
Speaker 3That was Rich Shalaba, the founder ceo of payment integrity partners, and he is my special guest on this episode, episode 315 of the leaders and payments podcast, and I'm your host, greg myers. Payment integrity partners brings to their clients a reimagined recovery audit. With their new process, audits will take substantially less time to complete, the client will be able to avoid friction with their suppliers and recoveries can be applied closer to the period they were earned for better margin reporting, rich and I dive deep into Pavement Integrity Partners, including what makes it unique, who their target audience is and the value of the service they provide. We've got a great episode ahead, so let's get started. Hi Rich, thank you for being here and welcome to the Leaders in Payments podcast.
Speaker 2Thank you for having me, Greg. It's great to be with you.
Speaker 3If you don't mind, tell our audience a little bit about yourself, maybe where you grew up, where you went to school, where you currently live, a few things like that.
Speaker 2Sure. I'm originally from a small town in upstate New York in the Finger Lakes region, where I grew up surrounded by a lot of family family that had lived there all their lives Also attended St Bonaventure University and SUNY Binghamton for my undergraduate and graduate work respectively. Both schools were also in New York, although on the southern edge of the New York-Pennsylvania state line. I always wanted to go to school in a bigger city than the one I grew up in, but never made it. My hometown population was about 20,000. St Bonaventure was in a town of about 30,000 to 40,000.
Speaker 2Binghamton wasn't much bigger. Payment Integrity Partners is located where I now live, here in Charlotte, north Carolina, in favor of the better weather and trying to get closer to that bigger city feel.
Speaker 3Okay, great. Well, let's go ahead and talk about Payment Integrity Partners. So tell our audience what you do, simply put.
Speaker 2We find money our clients overpay their vendors in error, or that they fail to collect money they were offered in support of some type of performance. Think of your favorite retailer paying a manufacturer twice for the same merchandise. That would be a duplicate payment example of the recovery we would identify for our clients. Or that same retailer paying for advertising of a manufacturer's items within an online ad or a circular a paper circular and failing to collect the money the manufacturer agreed to pay to support that ad. Those are a couple of examples and our efforts are a bit of a look back in time to make sure, basically, agreements are fulfilled as anticipated.
Speaker 2It was a business I never knew existed before entering the industry but, believe it or not, on average, retailers recover one-tenth of one percent of their sales every year in overpayments or under collections. This means that a retailer, say a $4 billion in sales revenue number, will lose on average $4 million a year. That would then be recovered by our work. Our industry works in retail, but it also works in healthcare, commercial, oil and gas and the tax industries. But we can focus on the retail industry. Today, many like to hide from auditors or analysts, but I like to tell our clients.
Speaker 3We're the fun company we find you money Are most of these customers of yours on the larger side. They are.
Speaker 2Errors tend to run small and what helps our efforts is when there's volume there to support that. So I would say on average we would look for a retailer or commercial organization or one of the other industries to have some size to it. In retail specifically, we'd look for about a billion dollars in sales and that can fluctuate a little bit. We do kind of go on either side of the billion dollar number depending upon the opportunity, but that's a generally a good benchmark.
Speaker 2Is your typical customer, like the CFO, yeah, we work with the finance organization or the controllers and CFOs. The smaller organizations will work more directly with a chief financial officer and as the organizations grow in size we'll get to a controller work with a vice president of finance or director of operational accounting.
Speaker 3Okay, and I mean, is it technology based? Are you in there manually doing a lot of processes? Can you kind of describe the product? I'm using air quotes for a product.
Speaker 2Sure, a lot of it is technology-based, and that is one of the key pieces that we use in all of our engagements. We have a proprietary tool set that allows us to move through the information as quickly and as efficiently as possible, and we have a number of proprietary tool sets that will help us do that. The data that we receive from clients is vast, so we receive data, for example, like EDI transaction data, purchase order information, invoice check, payments, scan sales at the register. We receive all of that information and in addition to that, we receive email data, the PST files from our clients and we use our technology to scan the entire data set to identify all areas of potential risks for the opportunity of recovering those dollars for our clients.
Speaker 3Okay, and the name Payment Integrity Partners. So talk about the payment aspect of it.
Speaker 2The name, specifically Payment Integrity Partners, came about by one. We are reviewing payment transactions. Those are payments made from our client, the retailer, to their vendor partners, and the integrity of that payment is specifically what we're looking for. So we're looking to make sure that what was agreed to up front was ultimately collected in the end. There are a lot of things that go on in between, For example, systems that communicate with each other and they may be different and things fall through the cracks there. There may be human intervention that is at play and we review those areas for potential risk. And then the partner's point is really we are a partner with our client and identifying these errors that are occurring. It really is a partnership that takes place because we need to understand kind of their business model, how they're engaging with their partners and the various activity that they are engaged with those partners, and so we're working with them constantly to identify how things are working. And as we identify how things are working, that's where we find the opportunities to recover dollars for them.
Speaker 3Okay, that makes sense. So I would assume most of these companies have software or some ERP type systems or something like that. Do you integrate into those, or are you just mainly pulling data from those?
Speaker 2Sure, we actually receive data dumps from our clients. So we're looking for the raw data and then, once we receive the raw data from our clients, that data is ingested into our process and our tool sets that we then use to massage the data, to create exceptions, that we then use to review for potential recovery.
Speaker 3Okay, that makes sense. So what does an engagement look like? Obviously, it doesn't sound like it's a SaaS model. Is it just a flat fee, or how do you price the service?
Speaker 2We actually work with our clients on a fee basis. So we charge our clients zero upfront. There is no cost for us to work with a particular client and our client is only charged if and when dollars are actually recovered and realized by our client. Dollars are actually recovered and realized by our client, so there's very little risk for our clients. We do work up front with each prospect to kind of identify the value we can bring for them. So we're looking initially to make sure that there are dollars that we believe can be recovered.
Speaker 1The reason for that is because there is an effort up front for our clients.
Speaker 2Their time is required to talk with us and work with us about business rules and how they engage with their vendor partners, but then there's also time involved on their side to extract the data pieces that are needed to conduct the audit.
Speaker 3What would you say? Differentiates your company from your competitors out there.
Speaker 2There are many different benefits that we offer clients over our competition. Our relationship with our clients is second to none. We engage with them on multiple levels regarding our findings and work with them as needed to help them address any necessary corrective steps and that's an important part in the process and we work with them to limit those leaks from happening going forward. We're transparent about our activity and in that way it benefits our clients for years into the future. They'll be able to make corrections to process or systems that we identify that would stem the loss of the dollars that we recover, and they'll be able to realize that year after year. Regarding our service outcomes, there are really five distinct ways we separate ourselves from the pack. We talked briefly a little bit ago about our technology, and we used our proprietary tools to review vast data that we discussed that we received from clients, and those tools enable us to identify errors more efficiently and effectively. Secondly, we look at everything, and that seems rather obvious for a company like ours, but we're very comprehensive in our approach. Analysts in our industry are typically paid based on commission and gravitate toward the low-hanging fruit, so to speak. Our approach, though, thoroughly reviews all potential areas of risk and, as I mentioned, our technology enables us to do that. Third, and I would suggest that this is probably one of the more important ones and one of the more valuable ones for our clients, and that is each of our examinations looks for our clients' uniqueness. And you might ask you know, a retailer is just a retailer, and why aren't the ways you approach each retailer the same? And I would tell you, on the surface they may be the same, but under the hood they can be very, very different. They can have different systems you mentioned ERP before and they could have different ERP systems, different methods, merchandising philosophies, etc. And there are those that are winning in the retail space and those that may be lagging, and that's true of any industry. And why? Because they operate differently. When we find out how they operate and how they operate differently, we add value to our audits for our clients. Fourth, we accelerate the time it takes to complete our work, and I mentioned a bit ago, our work is a bit of a look back in time and when we engage with a client, it's for a period that's passed by at least one calendar quarter and many times by much more. It really just depends on the client and their desire to accelerate or not, and we accommodate any particular method, but the time represents a challenge to the quality of information, access to personnel that may be present at the time and other factors. The earlier our work begins, the less time it takes to complete, the less friction it causes, the more money we ultimately collect for our client.
Speaker 2Lastly, retailers often employ multiple providers to make sure all lost revenue is recovered, so we might not be the only ones in the game. For a particular retailer, there may be two groups that look at the same material just one behind the other. We, however, represent a streamlined one recovery partner solution. Our process is accurate enough to only require one review and we're able to identify 90% or more of all lost revenue that's available in a fiscal year for a client.
Speaker 2I've said a lot there about our differences and believe most providers in the industry would cite some of the same differentiators if you spoke with them. However, greg, I'll tell you we've seen our approach provide benefits to clients that exceed our competition. 100% of the time we're able to make the comparison. So what that means is, if we are the second group that's reviewing this material, we can find 30% or more of what our competitors found behind them. If that means we're the first team to review the material and identify revenue loss, our results exceed our competitors' findings by 30% or more. So 100% of the time we're able to do more with the fiscal year in terms of recovering dollars than our competition has.
Speaker 3Okay, so I didn't realize. Not only do you identify, you help them kind of fill the gap or stop the gap from happening again in the future.
Speaker 2That's correct. So there's a couple of different ways we do that. As I mentioned, we're transparent in our approach and we would typically set up regular meetings with our clients, and regular would mean what they want it to mean. So it could mean we'd meet with them weekly, monthly, quarterly, but whatever the frequency we meet with them to talk about our progress and results. We're sharing what we're finding with our clients at each meeting, and at each meeting they have the opportunity to ask us questions, to look at examples of what we're seeing, and then we can then make process improvement recommendations and do so during those meetings.
Speaker 2That's one way in which we help our clients remediate the issues that may be taking place. The other way is we would actually work with them directly in terms of preventing recoveries or a particular recovery from happening ever. Again, that requires a little bit more in-depth analysis. We'd work with systems folks. We'd work with a project team to make sure that if it's a process that is causing the error and the leakage of dollars, we identify that process and work with them on how to make improvements to that process. If it's a systematic error and it requires coding to limit the leakage, then we would work with them on that and the particular code that would be necessary to stop the recovery from happening in the first place.
Speaker 3Okay, gosh, got. It Makes a lot of sense. So if you just take a step back and look at the bigger picture, broader view, where do you see all this headed, say, in the next three to five years?
Speaker 2It's a fun time to be a leader in this industry today. While the function of finance and accounting within retailers may not change much over time, things have changed in the recovery space and we see more opportunities to help our clients. Over time, our industry has seen a big move from a review of paper documents to the details of agreements being stored electronically, which has increased efficiencies. Also, over time, email data has been beneficial to the process because so much communication is now conducted over email, and our ability to develop tools that use keywords to search the vast data source. That has been a big benefit to our clients. Going forward, our ability to harness AI benefits will also impact our capabilities to search the terabytes of data we receive to realize even greater efficiencies. One of the other opportunities today is our ability to help our clients improve decision making through data analytics.
Speaker 2I've mentioned a couple of times that we receive a lot of data, and data really is our world. Data can tell us many things Things like how often a client is paying an invoice late by a day or two, foregoing a 2% allowance on that invoice. Another example might be what hours of the day are stores, for example, X, Y and Z the busiest, or perhaps another question the data can answer is what items are being purchased by a customer together? And each of these different questions that I just mentioned kind of the answers would imply some sort of activity that our client might engage in to take advantage of what they're seeing in the data. So when data is used effectively it can empower our clients to make more informed decisions that positively impact that bottom line and we can help them with that.
Speaker 3Yeah, it makes a lot of sense. Well, let's switch gears a little bit and talk about you. So tell us about your professional journey, how you got to your role there and started the company.
Speaker 2You know, greg, I always wanted to start a business but for a while I didn't think it would happen.
Speaker 2I didn't relish the spotlight and was part of an entrepreneurial organization I really enjoyed working with. Unfortunately, the organization changed and, after working in the industry 20 years, I began to feel the impact of private equity sales and consolidation, and the entrepreneurial organization I mentioned then lost its focus on client details and the value of our service represents, and I saw an opportunity to change that and began my journey. So what are some of the things that are going on in both of their lives and as we make the journey through high school and into college and all the experiences that entails? One of the business passions that I have are our clients. Almost sounds cliche, but I really do enjoy working with our clients from the standpoint of figuring out how to make improvements that they need figure it out, but they don't have time to fix the errors they see that are happening, that they know can make improvements to their overall performance, and working with them to identify those improvements and help them in any way I can is really something I enjoy.
Speaker 3And we'll wrap up here with one final question. I always like to get the guest kind of viewpoint. I think everyone sort of brings their personal experiences to. The answer is someone is maybe coming out of college, maybe it's your son in four years or five. He's coming out of school and he wants to go to work in this industry. What would you tell him at that age? Coming out of school, looking into an industry like whether you, however, you want to caveat this, or kind of bucket, this, a financial services kind of space what would you tell them they need to do to be successful? Great question.
Speaker 2And I guess I'm going to answer it broadly Over our lives. You know, interesting. It's interesting the people that have an impact on your life and how you think about things, and I began my career in sales. It's something our sales manager taught us. Stuck with me, and I think we were more working on the mechanics with our sales manager at the time about geez, how can we sell what we're selling to this person and show them the benefit? And that was the basic message, which was we can be successful if we can demonstrate our benefit to the customer. So my advice would be be passionate in your pursuit to demonstrate your benefits and your value to your customer, whoever they may be, and success will definitely follow.
Speaker 3Yeah, I love that answer. That's a very simple way of looking at it, but so powerful, so I appreciate you sharing that. So, for our listeners out there, what would be the easiest or best way for them to learn more about you and the company?
Speaker 2I would ask them to reach out on our website at wwwpaymentintegritypartnerscom, or feel free to call us here in the office at 980-288-8000.
Speaker 3Okay, awesome. Well, rich, thank you so much for your time today. I know your time is very valuable, so I really appreciate you being on the show today.
Speaker 2Greg, I appreciate you having me on to tell our story and thank you to you and to all the listeners out there for taking the time today.
Speaker 3Great, and to all your listeners out there, I thank you for your time as well, and until the next story.
Speaker 1Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.