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2400 Boston StSuite 407Baltimore MD, 21224(410) 276.6090www.rpic.com
AP Optimization
Building a World-Class Accounts Payable Operation
By Brian Rosenberg – June 8th, 2007
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Components of AP Optimization
• Reducing the Workload
• Leveraging Advanced Technologies
• Improving Customer Satisfaction
• Improve Invoice Matching Success
• Audit-Proof your Department
• Improve Financial Results
• Continuous Improvement
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• Patient Refunds– Process through cash ledger– Bypass AP– Keep the vendor file size in-check
• Employee Expenses– Best practice: Process through payroll
• EDI– Expand use of EDI for PO vendors– Consider GHX or other solution to expedite EDI
expansion
Reducing the Workload
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• Purchasing Cards– Reduced transaction volume– Faster payment– Obtaining Executive acceptance– The importance of good controls
• Don’t believe the sales pitch– Its not about rebates
Reducing the Workload
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• Imaging– Document Imaging is vital technology to an AP
operation• Paperless department• Tool to manage resource workloads• Eliminate “lost” invoices
– New technologies have long promised to eliminate paper – have they?
– Front-end vs. back-end scanning
Leveraging Technology
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• Imaging (cont.)
– Benefits of Automated invoice approval• Faster turnaround of approvals
• Eliminate finger pointing!
• Throw away the often ignored signature books
• Reports can track approval times
• Use metrics to track requisition to check timeline
Leveraging Technology
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Was the invoice coded with the department
number?
Invoice scanned and routed to
department for approval
Invoice Entered into AP20
Yes
Invoice is rejected and mailed back to
the vendor for proper coding
No
Invoice approved?
Additional level of approval necessary?
Continues through approval levels
until finished
Yes Approvals Completed
Invoice Received in mail/sorted/
scanned
Invoice routed to entry queue for
processing
No
Yes
Overview of Invoice Approval Process
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• Imaging (cont.)
– Other uses of imaging within Accounts Payable• Statements
• W-9 Forms
• Recurring payments
• Packing Lists
Leveraging Technology
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• OCR– Secrets of OCR
• Most use the same technology
• It’s not magic
– Explore with realistic expectations• High volume vendors should be on EDI, not OCR
– See it in action– Don’t fire anyone just yet
Leveraging Technology
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• E-payables– Realities of E-payables– Who really pays?
• Online Forms– Vendor request– Capital request– Employee Expenses
Leveraging Technology
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• Establish a customer service desk– Customer service is a responsibility, not an
interruption– Encourage emails over phone calls – don’t
accept faxes– Use generic email address– Track calls, but keep it simple– Provide basic customer service/email writing
skills to all staff
Improving Customer Satisfaction
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• Statement review is the most proactive task AP can perform!
• Typically statements are:– Ignored– Thrown away
• A good statement review process will:– Prevent credit holds– Reduce phone calls– Prevent late fees (if you pay them)– Make your department look good!
Improving Customer Satisfaction
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• Example of statement review process
Improving Customer Satisfaction
Statement is reviewed by the
Customer Service Rep
Statement is stamped “Reviewed” and
routed to the Reviewed
Statements Queue
Are there invoices on the statement >
60 days old?
Invoice is researched
Is the invoice in the system?
Yes
No
Vendor is contacted with payment
information or reason for late payment
Review Imaging Unapproved
queues for invoiceNo
E-mail delinquent approver for immediate
approval/denial of the invoice
Is the invoice found in a queue?
Yes
Contact Vendor and request copy
of the invoiceNo
Contact buyer to resolve buyer
message
Is there a buyer message for the
invoice?
Yes
No Yes
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• Review tolerances– Understand how much money falls within tolerance
– Spend time on the right problems
– Tweak tolerances for best balances of time and money
• Research your discrepancies for patterns– Same item many times
– Same vendors billing incorrectly
Improve Invoice Matching
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• Open lines of communication with Materials– Establish plan to proactively address data issues
– Use exception-based reporting to identify problem areas
– Create clear roles and responsibilities
• Create visibility to invoice matching issues– Track and post metrics (RNI over 30 days, INR over 30
days, % of lines with discrepancies)
Improve Invoice Matching
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• Division of Labor– Vendor file controls– Invoice/check division
• Duplicate Payments– Common causes of duplicate payments
• Duplicate vendors
• Keying errors/laziness
Audit-Proof your Department
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• Save 30% - audit the data yourself– Catch it early – quarterly audits– Get the money back – create a clear plan to
retrieve identified duplicates– Report the results – show your boss how you
saved the company money.
Audit-Proof your Department
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• Duplicate Vendors– Leading cause of duplicate payments– Create clear vendor naming conventions– Limit access to vendor file– Quarterly audits/review– Written plan for how to eliminate duplicates
• PO Vendors
• Non-PO Vendors
Audit-Proof your Department
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• Discounts– Should you take an available discount? – Always YES
– Monitor discounts lost and find root causes
– Work with contracting to negotiate realistic discounts• Never negotiate Net 10
– Work with contracting to negotiate more discounts
– Create visibility to discounts taken and discounts available.
Improving Financial Results
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• Changing the paradigm of work division
Vendors A - L
Vendors M - S
Vendors T - Z
Invoices Received
Invoices Entered
Invoices Entered
Invoices Entered
Vendor-centric
Work Division
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• Changing the paradigm of work division
Facility-centricLoc #1
Loc #2
Loc #3
Invoices Received
Invoices Entered
Invoices Entered
Invoices Entered
Work Division
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Accounts Payable Shared Service Center (fully implemented)
Accounts Payable Shared Service Center Manager
Purchase Order Team Lead
Non-Purchase Order Team Lead
Purchase Order Processing Team
Accounts Payable Reps
Non-Purchase Order Processing Team
Accounts Payable Analyst
Accounts Payable Reps
Vendor/Customer Service
Representative
Mail/Scan Clerk
Another View of AP
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• Establish Metrics– Identify the numbers that really matter– Establish targets– Report results on regular basis– Share metrics with your team and discuss
where improvements can be made– Share metrics with management
Continuous Improvement
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Brian Rosenberg
Senior Partner
RPI Consultants
brosenberg@rpic.com
www.rpic.com
Tel: 410.276.6090
Cell: 703.989.2180
Questions / Open Discussion