If Jim Arnold, the 44-year-old founder of APEX Analytix isn’t in his office, he’s likely to be found on a Triad area soccer field or tennis court.
As a player — in a 40-and-older league — or as a fan, cheering on his daughter’s youth soccer team. Or he might be playing tennis with his son.
His interest in sports doesn’t stop with these, either. Arnold also likes to run and to play golf.
That same competitive spirit carries over to his business, which provides audit software and audit recovery services. Driven by a desire to own his own company since his childhood days, Arnold developed an entrepreneurial spirit that he nurtures to this day. His company has been profitable since its inception in 1988, and he’s been nominated more than once as the Entrepreneur of the Year in North Carolina.
Local Tech Wire recently interviewed Arnold, the firm’s president and chief technology officer, to discuss his own approach to business and how the world in which APEX competes has been changed by such challenges as Sarbanes-Oxley legislation.
You’ve been nominated more than once as entrepreneur of the year. How does your spirit of entrepreneurship help drive (a) you personally and (b) your company?
When I think of the spirit of entrepreneurship, I think of it as passion for what you do. You don’t have to go far in a day to run into a business owner who loves to make his/her customers happy. This ranges from the restaurateur who ensures that your meal meets your expectations to the store owner who serves you with a big smile. All of us spend too much time at work not to be excited about what we do. If I can impart some of that excitement to our customers and our team, then I consider that a success. The one thing that excites me most in business is making customers happy, by either saving them money or moving their operation forward. This is even more rewarding when many of the clients are well-known companies that I have always respected and admired. Hopefully, our team shares that same excitement and commitment to the customers’ success.
What have been the salient factors in the success of APEX?
A passion for innovation, customer commitment and a great team of dedicated people.
What factors gave you the idea to launch the company?
For as long as I can remember, I have always wanted to own my own business. My father was a business owner (used car dealer), and I really enjoyed seeing him work with his customers.
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Just the Facts: Jim Arnold
Age: 44
Birthplace: Newburgh, NY
Education: BBA in Accounting Information Systems in 1983 from Pace University
Previous Employers: Texaco Inc. (computer programmer, 1983-1985); General Foods/Philip Morris (1985-1990 as IT auditor, financial auditor, senior financial auditor, and manager of financial planning for Maxwell House Coffee division)
Reading list: My reading interests are quite eclectic — some would say “Odd!”. I enjoy reading business magazines, trade journals, CFO magazine, IT Week, Fraud (published by the Association of Certified Fraud Examiners, of which I am a member), etc. I also enjoy reading technical manuals from cover to cover (SQL, MDX, etc.). The latest books I will be tackling are a few that Bill Gates has recommended and: Brand Royalty: How the Top 100 Brands Thrive & Survive; FAB: The Coming Revolution on Your DeskTop — From Personal Computers to Personal Fabrication; The Trendmaster’s Guide: Get a Jump on What Your Customer Wants Next; Blue Ocean Strategy: How To Create Uncontested Market Space and Make the Competition Irrelevant; The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization; Marketbusters: 40 Strategic Moves That Drive Exceptional Business Growth
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He was excited about the products, and his ability to make the customer happy. Right out of college, I began performing computer consulting engagements part-time while working full-time at Texaco and General Foods. In the mid-80’s, General Foods brought in a recovery audit firm to look for overpayments in their corporate accounts payable function. The gentleman who came in was sharp, extremely knowledgeable about accounts payable and professional, but conducted his audit on a totally manual basis. He scrolled through microfilm cartridges for about six weeks, and recovered about $120,000.
I asked my management within internal audit whether I could perform a computerized review of the same data. My focus was obviously much narrower, but could be performed for 100% of the transactions. The “technology enabled” audit generated an incremental $400,000 in recoveries beyond what the outside firm brought in. This seemed to be a great way to make a living, combining accounting and computer skills, with a dash of creativity. Over the next 2 years, I learned as much as I could by auditing accounts payable, trade deal disbursements, medical claim payments, and more. In every one of those operations, I was able to identify payment errors. Shortly thereafter, I left Philip Morris/General Foods to concentrate my efforts full-time on my business.
Can you please provide a brief overview of APEX Analytix?
APEX Analytix is a company that helps our clients Detect, Recover and Prevent overpayments. We accomplish this through proprietary software technology and over 160 talented people. Our team serves fifty-seven of the Fortune 500, and has software in place at approximately 30 diverse organizations to catch errors before they go out the door. We have three divisions within our company. One is focused on developing innovative technology to continuously improve our software products. The second and third are focused on providing technology and audit solutions geared to the retail industry, and to commercial organizations including manufacturers and service companies.
What are the largest “fear factors” your clients are expressing to you?
The biggest fear factors for our clients, who are large retailers, manufacturers and service organizations, are: error levels for overpayments, fraudulent vendor activity in their A/P operation, and compliance with the stringent requirements of Sarbanes-Oxley.
How are you positioning APEX to address those needs?
APEX is turning a previously slow moving industry totally upside down by promoting and installing error detection and prevention software. Recovery audit is an industry that has delivered value for years by recovering overpayments made in error. APEX’ unique twist is that our mission is to either prevent overpayments for manufacturers and service companies, or flag them to be addressed quickly in the retail industry. There are many benefits to this approach versus continuing to find the same errors year after year.
For one, we help companies determine the root cause of overpayments, an internal control element of Sarbanes-Oxley compliance. And, not only is this internal control oriented approach consistent with Sarbanes-Oxley and fraud prevention, but it’s a complete paradox in an industry that has prospered from the errors continuing. For retail companies, where the cycle times for recovering errors can be 18 months or more, the impact on suppliers is measured in time and money. By moving to real-time audit, retailers help improve vendor relations and even their ability to negotiate better deals.
To find the increasingly complex errors in large companies’ payment processes requires sophisticated software algorithms and a strong team of experts in recovery audit, accounts payable & procurement. We continue to hire the most talented people within (and outside of) our industry, and have invested heavily in our software development group. Our tools need to be incredibly easy to use, but also be able to capture the most vexing overpayment errors that can occur. We are seeing that error identification and prevention software, previously installed by early adopters, is becoming the best practice for large organizations. Our technology takes A/P excellence a step further: reducing the risk of vendor fraud, improving A/P controls for SOX compliance, and automating some of the most time-consuming A/P and shared services activities.
Vendor fraud and vendor verification are two big issues your company is tackling with custom services and software. Would you say these industry issues are the equivalent to identity theft with consumers? How are these issues similar/different and can one affect the other?
There are certainly similarities between vendor fraud and identity theft, as they are both costing organizations tremendous amounts of money that could be better deployed elsewhere. The biggest difference is that vendor fraud, by and large, is committed by insiders with a trusted role in the organization versus being committed from the outside. The technologies and pattern patching techniques that have been developed to combat each can be leveraged in both situations. The identity theft issue certainly hits retailers and card providers the hardest, while our experience shows that the vendor fraud issue hits hard across all industries.
Obviously APEX provides software solutions; what are the “human factors” you address in working with clients in terms of training, awareness, insight into detecting and handling these problems?
The key learnings regarding “human factors” come to us from clients. Every time I meet with a client, I get a renewed sense of the challenges they face, and what APEX can potentially do to help. The first part of the equation is creating the awareness among clients that fraud and overpayments can happen in their operations. It is not “their fault”, but is a function of human failings, and systems that were not designed to find and prevent all errors.
The second “human factor” is ensuring that our solutions are intuitive and user friendly. Given the advances of the Internet, the standard of performance for software now is that someone should be able to use a software application with little to no training. The software should be built to accommodate the way people think or work within an industry.
The third aspect is training. Part of our training is software related, but the other part of training is domain expertise. As we show a client how to use our vendor fraud approach, inevitably, we will begin sharing the forensic experience to isolate “true” vendor fraud from among 50,000 vendors. Much of this insight has been gained firsthand from our clients in dealings with the repercussions of vendor fraud in their operations.
Analytix is a term and a technology that was virtually unheard of just a few years ago. How has APEX embraced this technology and used it to benefit its clients and better the industry?
As systems proliferate, it becomes increasingly difficult to react to the volume of data collected. I think of “analytix” as the engine that culls through massive quantities of data to flag situations that require action, i.e. stop an overpayment, flag questionable vendor activity, fix an incorrect purchase order, etc. In modern software, we can take advantage of scheduled events, graphical screens, email alerts, and action flags of red/green/yellow to discern the criticality of situations. What is occurring in my operation that I should be concerned with, and how should I react to it? The value of APEX’ offerings stem in large part from highlighting those situations that require immediate action. The technology our team is developing has a keen focus on how we can quickly & efficiently bring situations to light, and minimize the work/review involved to take the desired actions.
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Just the Facts: APEX Analytix
Corporate headquarters: Greensboro, NC
Web site: www.apexanalytix.com
Number of employees: 164
Year founded: 1988
Primary focus: Audit software, recovery audit services
Financing: Company has been profitable since its inception. Noro-Moseley Partners and The Wakefield Group invested in the firm in 2003.
