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The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 9/9/2016
Improving AP Processes
without Automation
Pam Miller
Senior Trainer : : IOFM
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 2 9/9/2016
The “Paperless Office”
• Coined by George E. Pake, Xerox Corp’s Palo Alto
Research Center in a “Business week” article in 1975
– Predicted that in 20 years – in 1995 – he would
have a TV terminal and keyboard on his desk and
that he didn’t “know how much
hard copy” he would want in that
world
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 3 9/9/2016
The answer = “Quite a lot”
• Forrester Research says that every day one BILLION
copies are made
• The Paperless Project says that 45% of the paper
printed in offices is trashed by the end of the day and
• That the average office worker uses
10,000 sheets of paper every day
• Gartner says that the average
company’s growth rate in terms of
paper produced is 25%
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 4 9/9/2016
So, you are not alone • If your Mondays look like this
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 5 9/9/2016
Because… • AP has always been a paper intensive business
– Invoices
– POs
– Receiving documents
– Proofs of delivery
– Checks
– Remittances
– Exception documentation
• And, let’s face it, a data entry intensive business
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 6 9/9/2016
Automated systems focus on these issues
– paper and data entry • EDI
• e-invoicing
• ACH
• Other electronic payments
• Automated T&E processing
• Imaging
• Automated workflow
• But, not everyone can implement these systems
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 7 9/9/2016
And even if we are willing
• Our organizations may not be (due to financial
or other constraints)
• And many of our vendors are not willing, or not
able
– Automation of back office
functions is not high on the
to-do list at many organizations
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 8 9/9/2016
The truth of the matter is… • Even with implementing all of these systems the
paper never really goes away completely
– For heavens sake, some folks still print out
e-mail!
– People LIKE paper!
• So what can we do to lighten
the paper load now, today?
• And streamline the entire
process to boot?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 9 9/9/2016
Let’s begin at the beginning – incoming • Insist that all invoices are sent to AP first
– Instruct vendors to send all invoices directly to
AP no matter what
– Train the mail room that all
invoices go directly to AP
regardless of to whom they
are addressed
• Require PO#, BU#, buyer’s name, or some other
identifying information on all invoices
– So you know where they go/whose they are
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 10 9/9/2016
Sounds counterintuitive…
• How can AP eliminate paper if we insist we get
ALL of it?
• Eliminating paper is not the only goal – we want
to streamline the entire AP process
• And that means limiting exceptions,
lost invoices, vendor calls
• So we need to gain control of the
invoices – all of them
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 11 9/9/2016
Eliminate some Postal Mail • Many vendors can send invoices
as .PDF attachments to e-mail
– It’s good for vendors – no
envelope stuffing or postage
• But – remember to go generic so invoices do not go
directly to a staffer who is out for the day, week, or who
has even left the organization
• It’s good for AP – the invoices arrive, envelopes do not
need to be opened, invoices extracted, and unfolded
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 12 9/9/2016
BUT • A .PDF is just a picture, it’s not data
• There are solutions available that can
– Convert the data to a text file
or excel
• Talk to IT about it
– They may already be using such a solution
– Or be aware of one that is available now that
they know you need it
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 13 9/9/2016
Eliminate even more Postal Mail • Consider asking vendors (especially those who send lots &
lots of small dollar invoices) for excel or text files
– Ask for a specific format or modify the format you get so
that you can upload invoices directly
into your system
• And that old standby the fax
(not dead BTW)
– It already has a date and time stamp on it
• Date and time stamp
– Ammunition for discount push back
– Or defense of AP when approvers make payments late
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 14 9/9/2016
Prevent problems from the outset
• Receive one vendor’s invoices
one way only!
– Different formats can have
different invoice number formats
– Be especially careful
mid-conversion
– Duplicates…
• Provide vendor number from your system to vendors
and require that it appear on invoices
– Helps prevent paying the wrong vendor
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 15 9/9/2016
The invoice is here, now what?
• Time to pay the bills
– While that sounds simple enough, those of us in AP
know that it is anything but simple
• First, there are many types of invoices
– And different types of invoices often
require different processing methods
– Some require a match process
• Often a three way
– Some an approval process
• Which means the invoices may need to leave AP
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 16 9/9/2016
Easy??? • And many different invoice formats
– Sometimes we have hunt for the
bits of information we need to process them!
• And then there are the exceptions
– the less than perfect invoices that arrive in AP
that require additional or “special” handling
• Why does it seem that the pickiest of
vendors – those who want to be paid
right now – are the ones who can’t
manage to send a correct invoice on
time and to the right place?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 17 9/9/2016
Keeping those invoices in AP • Invoices that do not arrive in AP or that must be sent out
for various steps in the process can cause problems
• They do not ever come back
• They do not come back on time
• Vendors call wanting payment
• AP staff spends time answering phone
calls, investigating, hunting, nagging
• And AP ends up with a not too pleasant rep
• So let’s see if we can find more ways to complete them
without them leaving AP
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 18 9/9/2016
Matching • Attack problem PO & receiving
documents at the source
– Get to know purchasing
& receiving staff
• Feed them…..
• Use a variance – do not chase small differences
• Treat different invoices differently in this process
– Low dollar, routine, recurring
• Consider allowing a 2 way match for some invoices
instead of a 3 way match
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 19 9/9/2016
& Approvals • Treat different invoices differently in this process
– Low dollar, routine, recurring
• Eliminate unnecessary approvals
– A PO = approval
– Establish dollar limits
– Consider certain types of invoices or vendors
• Utilities like electricity, gas, & water
• How many approvers REALLY
look at what they are approving?
– AP probably inspects the invoice
more closely than most approvers
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 20 9/9/2016
Approvals, continued • Negative assurance or assumed receipt
– Send e-mail with .PDF of invoice to approver
– Indicate drop dead date when it will be paid
with or without approval
– Then pay it on that date –
no news is good news
• Consider no approvals – well, really,
approvals after the fact
– Via reporting – your system probably produces a report of
invoices entered, when they will be paid and/or when they
were paid – sorted by cost center
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 21 9/9/2016
Coding • Can AP code some invoices?
• In reality despite the size of the chart of accounts invoices are
coded to a limited number of accounts
• We understand coding
• We see (right & wrong) coding on a daily basis
• Just because the owner of the expense does the coding
doesn’t mean it’s correct
– How many times have
you made corrections
because someone kept
changing their mind?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 22 9/9/2016
Invoice control is only the beginning • Now we have to get them into the system
• Invoice numbers are the key to ensuring we do not enter
(and pay) an invoice twice
• But not all invoices have invoice numbers
• And just because an invoice has a number on it doesn’t
mean that the number will be entered into the system
correctly/consistently
• Here, inconsistency is a
disgrace (voids my favourite
quote ever…)
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 23 9/9/2016
Entering invoices with invoice numbers
• Define rules for entering invoice numbers
– Caps or no caps – does your
system distinguish?
• If so you need to specify what
is proper usage
• What about punctuation?
• Leading zeros?
• Create a style guide or cheat sheet
• Insist that everyone use it EVERY time
– And check periodically to be sure that they do
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 24 9/9/2016
Invoices without invoice numbers • Studies show that 40% of invoices do not have invoice
numbers!
– Phone and other utility bills
– Service provider invoices
– Internally generated invoices
• Create a numbering system for invoices without
numbers
– Keep it simple so people can remember how it
works
– Remember that the numbers must be UNIQUE
• Just the date is not enough
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 25 9/9/2016
Invoices without invoice numbers (cont’d.)
• That style guide or cheat sheet needs to address
number formats for invoices without numbers
– As many variations as everyone can think of
• Review and update periodically
• Ensure everyone has the SAME guide
• Insist that everyone use it EVERY
time for EVERY invoice without
a number
– And check periodically to be sure
that they do
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 26 9/9/2016
Internally generated invoices • You have more control over these than over vendor
invoices – make it easy on yourself!
• Check requests, tax payments, customer refunds, etc.
• Forms – historically paper
• Move to some sort of electronic form
– A web form that can be filled out
– A .PDF document that can be filled out
– A (locked down) spreadsheet that can be filled out
• All available on a shared drive, the intranet, SharePoint...
• All configured so that the data filled in can be extracted and
imported into your accounting system
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 27 9/9/2016
Internally generated invoices (cont’d.) • Numbering system – they need numbers just like invoices
– Paper forms – pre-number, or use a log of some sort • Or create a number based on origination point, date, vendor
– Electronic forms – generate a sequential number
• Include this concept as you design the form
• Determine proper approval signature requirements
– And for electronic forms what is good enough?
• Based on computer id?
• Based on computer log in?
• Some sort of electronic signature?
• Insist on backup
– Refuse to process without valid backup
– Provide ability to upload scanned backup
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 28 9/9/2016
Resolving “Orphan” invoices • e-invoicing systems can be configured to reject
invoices that are incomplete or contain invalid
information
• You could emulate them and simply
return them to the vendor
– Or at least contact them via phone
or e-mail
– Opportunity to educate the vendor as to what to
include on the invoice to prevent delays in future
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 29 9/9/2016
Or take advantage of AP power • And try to resolve in house
– AP staffers see the same invoices over and over
– The system contains a wealth of information
• Look at what is billed
– Keep a list of which buyer buys what
– Send it to Purchasing for help (another
training opportunity)
• Consider using a “suspense” account
so invoice can be entered (and perhaps paid)
– But this requires someone reconcile & clear
the account periodically
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 30 9/9/2016
All well & good, but
• Can we eliminate some invoices altogether?
• Yes, we can
• Let’s focus on small dollar invoices
• Many invoices are small dollar –
prove it to yourself
• And they can take as much time to
process as the large dollar ones
• Or more – sometimes it seems like the little ones are
the ones with all the problems
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 31 9/9/2016
Consider… • These are great candidates for billing via spreadsheet
• Consolidate payments
• Allow some (small) payments to be paid via expense
reports
– With proper documentation!
• Consider using petty cash
– With proper documentation!
• Purchasing cards – they were
designed to handle small dollar invoices
– And they do it very, very well
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 32 9/9/2016
P-cards • Yes, there are cons, but there are many pros
• They provide real process savings
– The invoices never even show up in AP!
• Rebates may be available
• They come with are a technology
tool that card issuers will customize
– Add cost center to every card
– Cross reference your GL codes
to MCCs
– Upload transactions into system
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 33 9/9/2016
Data entry • Eliminate it whenever possible
• We’ve already talked several
ways to upload
• Electronic invoicing for just a few biggest vendors can
significantly decrease the need
• Can you link systems so some data can be pre-
populated?
• Talk to IT – that’s another department worth making
friends with
– Feed them…..
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 34 9/9/2016
Data entry – when you must… • Keep it simple
• Standardize, standardize, standardize
• Use standard formats
– Not just for invoice numbers – for all fields
• Use drop down boxes
• And pick lists
• Avoid the mouse
• Use “hot” keys
• Review what has been entered for
errors/reasonableness!
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 35 9/9/2016
Handling exceptions • Prevention really is worth a pound of cure
• Remember to cultivate purchasing & receiving
• Track problem vendors
– Teach vendors how to do business with you
• Educate and re-educate as necessary
• Use variances/tolerances
– Avoid spending more labour dollars investigating and
fixing discrepancies than their value
– Review periodically to ensure they are at the correct level
– But track them, at least informally
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 36 9/9/2016
Handling exceptions (cont’d.) • Use cheat sheets
– Information AP can use to
resolve repetitive errors
• Freight issues
• Sales tax issues
• Different terms for different
remits
• Or create a WIKI
– Or some sort of shared repository of problem
solving knowledge
– And forms/form letters
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 37 9/9/2016
Handling invoice adjustments • They are inevitable
• Pay the invoice
– Provide clarity on remittance
document
– Enter a separate inclusion or
deduction document
• If you are paying more or less
than the invoice, tell the vendor what
you are doing and why
– Decreases the number of vendor calls
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 38 9/9/2016
Handling rush payment requests • Communicate the schedule
– Including cut-off times
• Regularly review payment run frequency
– Balance frequency against number
of rush payment requests
– Which costs more? An additional run each
week or stopping everything to handle each
and every rush request?
• Say NO
– Assuming upper management has your back
• Require extra approvals
– From the toughest executive in the building
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 39 9/9/2016
Rush payment requests, cont’d.
• Charge for it
– Experiment until you find the proper fee
amount to discourage frivolous requests
– I charged $125
– Ben at PG&E charges $250!
• Explore alternatives
– ACH, p-card, calling the vendor
• Keep track of abusers
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 40 9/9/2016
Preventing duplicate payments • Remember, accept invoices from vendors in one
format only
– And be sure everyone understands which format
each vendor should use
• Establish rules for paying from copies
– And define what a copy is!
• Remember, it’s important to create rules
& a style guide for entering all data
– Invoices with numbers
– Invoices without numbers
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 41 9/9/2016
Preventing duplicate payments (cont’d.)
• Account for multiple remit addresses – If system allows it – one vendor with
multiple remits
• Decrease number of check requests
– P-cards
• Do not pay from statements – Or if you do, ensure that invoices from
statement vendors are not entered
• Flag vendors paid by p-card, wire, upload, etc.
– Pay vendors by one method only – “@”
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 42 9/9/2016
Preventing duplicate payments (cont’d.)
• Consider adding a separate PO box for p-card, EDI,
(statement) etc. vendors
– Assuming your mail room can maintain
the separation
• Watch system uploads
– Look for errors & incomplete files
– Take care when fixing these – just
uploading the file again could cause a problem
• Use system reporting but add more – Demand (!) a report that lists invoice numbers, amounts,
and dates across the entire vendor population
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 43 9/9/2016
Preventing duplicate payments (cont’d.) • The root cause of many duplicate payments
is duplicate vendors in the master vendor file
• AP should own the vendor file
– Or be close friends with whoever owns it
• Develop a style guide for entering
vendor information, too
– Not just the vendor name –
remittance and address information
as well
– Establish rules around acceptable
abbreviations and punctuation
• Keep it clean – deactivate or purge on an ongoing basis
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 44 9/9/2016
Preventing duplicate payments (cont’d.)
• Review data entered into the system
• Resolve exceptions promptly
• Do not stretch payments
• Be aware of when errors are likely to happen
– End of year
– System implementation or
Change (think upgrades)
– Divestitures, acquisitions, mergers
• Do a recovery audit periodically to recover funds
and look for weaknesses in your processes
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 45 9/9/2016
Track effectiveness • Working monthly statements pays off
– Eliminate all but those with amounts in 90 day
box
– Investigate invoices showing as unpaid
– Investigate “on account” amounts
– Take open credits or request checks
• Run credit aging reports
– Determine what a reasonable balance is
– Investigate vendors outside of those parameters
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 46 9/9/2016
Start here • Do you run reports that no one
reviews? Or rarely?
• Do you need to know things that
available reports do not show you?
• Does anyone ever say that you do something or do
it in a certain way because “that’s the way we have
always done it?”
• Are there things you always throw to the bottom of
the in basket or keep pushing to the bottom of the
to-do list?
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 47 9/9/2016
Don’t neglect the payment side • Move to ACH
– Even switching a few vendors to ACH
eliminates a great deal of labour in printing
and stuffing checks -- & paper!
– And costs substantially less than paying via check as well
Consider using pressure-seal checks – no more stuffing!
• Put a p-card in AP
– Many invoices say right on them that they take cards
– How about one in Fixed Assets, too?
– Pay all 1099-able vendors on the p-card & eliminate 1099
reporting
The Accounts Payable & Procure-To-Pay Conference & Expo is produced by: 48 9/9/2016
Questions:
Contact Info: Pam Miller: [email protected] or [email protected]