service quality innovation trust safety the samet way “managing the company cash position”...

Service • Quality • Innovation • Trust • Safety

The Samet Way

“Managing the Company Cash Position”

Accounts Payable (AP) should always be less than

Accounts Receivable (AR)


What - WE can improve

EFFICIENCY • Avoid costly, time consuming re-work by submitting accurate AP

& AR to accounting (do it right the first time)

RELIABILITY• Comply with established deadlines so reports generated by

accounting include reliable information


How - We Can Improve

1. Establish Standard Operating Procedures (SOP) for efficient monthly routine AP/AR efforts

2. Clarify roles and responsibilities

3. Allow more time to ensure accuracy of AP/AR processed to accounting


Issue #1

NEGATIVE CASH FLOW

Accounts payable (AP) become due prior to and without consideration for receipt of funds (AR) from Owner.


SOP to Eliminate Issue #1

• Owner billing (AR) must be submitted to accounting by the first day of the month.

• Owner billing (AR) must be approved such that

payment is received prior to any subcontractor or supplier payment (AP) due date.

• Owner billing (AR) must include same subcontractor and supplier values submitted to accounting for payment (AP).


Issue #2

INCONSISTENT CONTRACT PAYMENT TERMS

Samet payment terms with subcontractors and suppliers not in compliance with payment terms of Samet agreement with Owner.



Project Manager must review owner agreement for any special payment terms. Special payment terms shall be incorporated into subcontractor and supplier agreements.

Project Manager to notify Accounting of any special payment procedures, otherwise SOP payment terms will apply.


Issue #3

DISREGARD OF DEADLINES

Financial reports generated by accounting do not provide accurate status of company payment obligations (AP).

Payment obligations (AP) are not being approved before first Friday of each month.

Executive Leadership cannot rely on financial reporting for planning.



Project Manger ensure subcontractors and suppliers expecting payment, provide applications by the 20th of each month.

Accounting will scan and route invoices through the last day of the month.

Group Manager approval required for payment of any invoices received on or after the 1st .

(as a rule, subcontractor invoices received by accounting after the 1st, will fall into the next months payment cycle)


Issue #4INEFFICIENT USE OF OUR TIME

Current contractual deadline for subcontractor and supplier payment application does not allow sufficient time for project manager “PROPER” review and any modifications.

Current company policy does not permit Project Manager to modify received AP.

“SLOPPY” applications (overbilled / incorrect) are submitted to accounting for payment.



• Samet vendor agreements will require request for payment (AR) be received by the by the 20th of the month.

• Project Manager to enter with “penciled” modifications. • Project Manager to contact and ensure

correction/reconciliation of following months subcontractor or supplier application for payment.

• Project Manager to obtain and submit to accounting

reconciled application for any payment due.


Actions

1. Changed payment terms in standard forms of agreement to require invoices (AP) due by the 20th

2. Attachment created for standard forms of agreement to emphasize modifications to payment terms

3. Template created in Prolog as example of method to communicate when an invoice (AP) needs to be revised

4. Website updated to include date change


Action #1 Subcontract Language: Payment shall be made in installments as the Work progresses unless Subcontractor is in default. By the 20th day of each month, the Subcontractor shall submit to the Contractor a written requisition or application for payment, on a form approved by Contractor, showing the proportionate value of Work performed and completed to date, along with all substantiating data and information as required by the Contract Documents, from which shall be deducted: (i) a retainage of 10% of such proportionate value; (ii) all previous payments; (iii) all charges for materials and services furnished by Contractor to the Subcontractor; and (iv) any other charges and deductions as provided for in this Agreement or in the Contract Documents. The balance of the requisition, to the extent approved by the Owner and Contractor, shall be payable to Subcontractor within seven (7) calendar days after payment for same is received by Contractor from Owner. It is expressly agreed that Contractor’s receipt of payment from Owner is an absolute condition precedent to Contractor’s payment obligation to Subcontractor. PO Language: ARTICLE 3. Payments/Release of Liens. By the 20th day of each month, the Subcontractor shall submit to the Contractor a written invoice or application for payment, on a form approved by Contractor, showing the proportionate value of Work performed and completed to date, along with all substantiating data and information as required by the Contract Documents. All prices will be paid in current funds; subject to additions and deductions for changes as may be agreed upon in writing. Payments shall be made in accordance with the payment terms on the other side hereof but only for work actually performed or materials actually delivered in full conformance with the requirements of this Purchase Order. Seller agrees upon request, to give Buyer a Release of Lien or of the Right to a Lien arising out of past, present, or future work on this Purchase Order on a form acceptable to Buyer and Owner accompanied by such receipts or releases from Seller’s material suppliers as may be requested by the Buyer or Owner as a condition precedent for payment. Buyer shall have the right to apply funds otherwise due Seller hereunder to any other liabilities or obligations of Seller to Buyer arising from this transaction or from any other transaction or circumstance.

Short Form Subcontract (Work Order) Language: Progress Payments. By the 20th day of each month, the Subcontractor shall submit to the Contractor a written requisition or application for payment, on a form approved by Contractor, showing the proportionate value of Work performed and completed to date, along with all substantiating data and information as required by the Contract Documents. Within 7 days after receiving a progress payment from Owner under the Contract, Contractor shall make a progress payment to Subcontractor equal to the value of the Work as of the corresponding Monthly Billing Date, to the extent approved by Contractor and allowed and paid by Owner on account of the Work, and after deducting (a) all previous payments, (b) current retainage and (c) all charges or backcharges for services, materials, equipment and other items furnished or otherwise chargeable by Contractor to Subcontractor. Retainage amount shall be ten percent of the completed Work value. PSA Language:Payment. The Consultant shall submit application for payment no later than the 20th of each month for the Services it has performed. Samet, the Owner, and its representatives have the right to obtain supporting data and/or audit as reasonably related to fees and expenses that have been billed and/or paid. The Consultant must sign a waiver/release form acceptable to Samet before receiving final payment.


Action Item #2


How We Benefit

• More time to improve accuracy of reporting• WIP & Waiting no longer an “emergency”• Ease of standard procedure efficiency• Consistency across groups• Subcontractors & Suppliers paid as planned• Clarity of Responsibilities• Enhance the company cash position (improve cash flow)


Questions?


Thank You!