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The Payables

Transformation by

Hyacinth Ferrao

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While every CFO needs to undoubtedly spend time

on strategic & tactical matters, it is also very important to

pay attention to timely & accurate processing of vendor

payables. Every CFO can, I am sure, recollect one or two

or even more payment escalations that have come to

either them or at times even the CEO of their company.

What follows then is a frenzy of activity to find out which

are the invoices pending, where are they lying currently,

why were they not paid? More often than not there is a

mad scramble to unearth the facts and respond promptly.

Now, let’s imagine – what if we could at the click of a

button see if invoices have been received for a vendor,

view the actual invoice online (if received), ascertain what

was the issue with the invoice, how long was it kept

pending and when was the query posted back to the

vendor? sounds good, doesn’t it? Interested? Then read

on.

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The enabling of all this is really not very complicated.

Lots of companies now use ERPs and these systems can

be leveraged to enable all of the advantages stated above;

though there are a few corporates that use off the shelf

applications to handle invoice processing. While the latter

approach reduces the requirement for ERP customization,

more often than not, creating a watertight integration layer

between the payables front end and the ERP is quite

challenging with respect to masters, data exchange &

consequently the reporting.

Let me explain how one company achieved all of this.

Their payables transformation initiative centered around

two key aspects–

1) Setting up of a centralized mail room where

invoices were received, scanned & Indexed

2) Customization of the ERP to ensure:

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a. All scanned invoices are tagged to the

relevant purchase order / accounting entry

b. All issues with invoices are flagged & raised

with the relevant department / vendor &

c. Periodic reporting (TAT) on invoices

received, lying in resolution, processed &

pending

The process is summarized as follows:

1) Invoices received at the centralized mailroom are

keyed into a customized screen in the ERP;

generating a unique identification number.

2) These invoices are then scanned and tagged in

the ERP using the unique number generated in

1) above.

3) The payables team verifies the invoices in the

system with the PO, GRN / SRN and posts the

same.

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4) Where no POs are created / required, an online

workflow sends the invoice to the concerned

approver to view and approve online.

5) Any issue / query is updated in the ERP and this

triggers off an auto email to the relevant user /

vendor email ID.

6) On satisfactory resolution of all queries, the

payables team ensures payment on the due date.

7) Fortnightly / monthly reporting generated through

the ERP on no. of invoices received, queries

pending resolution, processed not paid / paid,

etc.

8) Online dashboard available to internal

stakeholders & vendors to view status of their

invoices & payment TAT.

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Benefits: Easy & Online retrieval of invoices for audits

& reference, integrated interface between the front end

invoice receipt & back end invoice processing, full

transparency on invoice status at all stages of the

payment cycle across all vendors, a proactive rather than

reactive approach to payables outliers, timely reporting of

TAT & other reports to all stakeholders. And last but not

the least, quick response to all payable escalations made

to the CXOs.

A little word of caution though, the system set up

requires significant investment of time & effort by the

finance team in particular to ensure the right processes

are built in; but needless to add, the result is truly

transformational!

-By Hyacinth Ferrao, Financial Controller & Senior

Vice President, Star India

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About the author:

Apart from overseeing the controllership function at

STAR India, Hyacinth has been actively involved in

projects involving systems implementation, outsourcing

and mergers. He has also been associated in the past with

the Timesgroup and PwC in various roles.

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