[webinar] unveiling the benefits of accounts payable with the institute of financial operations
TRANSCRIPT
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Unveiling the Benefits of Accounts Payable within an Organization
March 22, 2012
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• Introduction
• Major Benefits
• Other Benefits
• Conclusion
• Questions
Agenda
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• Role of AP in organization
• Importance of AP
• Benefits of AP Automation
• Other Benefits
Introduction
25.5%
24.3%18.3%
15.9%
10.0%6.0%
Better Visibility and reporting
Lower Costs
Faster Turnaround
Fewer Errors
No Benefit Gained
Better Management of Working Capital
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Major Benefits of Accounts Payable
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• Facilitates Centralization
• Allows for ‘real time’ status of invoice
• Improves approval and dispute resolution
• Increases customer service
• Backlog management
• Identifies control or audit issues
Improved Visibility
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• All invoices accounted for in tool
• Proper accrual recorded at month-end
• Invoices available for review
• Facilitates the audit process
Accounting Process
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• Invoices captured immediately
• Invoices handled one-time
• Helps balance peak demand
• Visibility to disputed invoices
• Reduces time-to-enter
• Allows for the development of AP Rep metrics
Improved Productivity
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• Bottleneck Management
• Invoice queues optimally structured
• Management of peak volumes
• Flexible among AP team
• Reporting available
• Published metrics
Workload Balance
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• Interface to current ERP system
• Automated matching of PO based invoices
• Online G/L coding of invoices
• Allows team to focus on root cause, corrective action, and streamlining processes
• Links established to supporting documentation
Efficiencies with ERP System
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• Avoids degradation of reputation
• Enhances departmental productivity
• Minimizes duplicate processing and payments
• Improves Customer Satisfaction
Improved Quality
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• Reduction of credit holds
• Avoids potential price increase
• Favorable for development of long-term
relationships
Supplier Satisfaction
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• Increased accuracy of backlog reporting
• Provides for ‘true’ volume of backlog
• Visibility to potential bottleneck
• Facilitates root cause and corrective action
Backlog Reporting
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• Starting point for best-in-class
• Phases of invoice scanning and workflow
• Successful completion of each phase
• Overall goal
Best-in-class
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• Allows for one central point for processing
• Enhances visibility
• Standardization of processes
Globalization/Centralization
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The globalization and centralization of the accounts payable
process will provide all of the following benefits except:
a) One center point of processing
b) Guarantee that the cost-per-invoice will decrease
c) Facilitate the standardization of polices and procedures
d) Enhanced Visibility
Polling Question #1
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The globalization and centralization of the accounts payable
process will provide all of the following benefits except:
a) One center point of processing
b) Guarantee that the cost-per-invoice will decrease
c) Facilitate the standardization of polices and procedures
d) Enhanced Visibility
Polling Question #1
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• Compare ‘apples-to-apples’
• Efficiencies gained for reduction of data entry
• Integration into ERP systems
• Reduction of disputes
Lower cost per invoice
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• Real-time access to invoices
• Efficiencies from electronic storage
• Month-end accrual process
• Supporting Documentation
• Establishment of business rules
• Identification of duplicate payments
Audit and Compliance
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• Due diligence – vendor setup
• Rounded amount invoices
• PO Compliance
• Invoices below an approval amount
• Utilization of positive pay
• Check requests
Fraud Prevention
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• Eliminates lost invoices
• Provides visibility
• Workflow
• Allows for quick response from AP Team
• Real-time access to invoices
• Facilitates dispute resolution
Customer Service
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Other Benefits of Accounts Payable
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• Analytical versus transactional thinkers
• ‘Soft’ skills training
• Reward and recognition
The People
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Hiring the people with the required level of competency will
provide all of the following benefits except:
a) Focus on analysis and exception handling
b) Increased level of customer service
c) Efficiencies gained through reduction of headcount
d) Increased volume related to data entry
Polling Question #2
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Hiring the people with the required level of competency will
provide all of the following benefits except:
a) Focus on analysis and exception handling
b) Increased level of customer service
c) Efficiencies gained through reduction of headcount
d) Increased volume related to data entry
Polling Question #2
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• Analytical thinkers
• Identify “true” cause
• “How can we do this process more efficient?”
• Streamline processed related to disputes, overpayments, duplicate payments, and payment to wrong vendor.
Root Cause and Corrective Action
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• Three components of working capital: inventory, accounts payable, accounts receivable
• Flexing payment terms and timing of payment runs
• Payment terms based on actual receipt of product
• Critical expenses
• Supply Chain Finance (SCF)
Improved Working Capital
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• Formula used to analyze discount strategy:
• Scenario: A vendor provides a 1.5% discount if paid within 10 days:
Managing Discounts
Discount Total Period
100% - Discount Days Saved
Effective Annual Rate of Return Formula
1.5% 365
100% - 1.5% (30 - 10)
Rate of Return 27.8%
Effective Annual Rate of Return Formula
1.5% 10, net 30
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• Invoice sent direct to requisitioner
• Critical payments such as utilities, tax,
lease and rent
• Working capital strategy communicated
with supplier
Prevents Late Payments
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• Debit balances result in overpayment to supplier
• Timely follow-up for debit balances
• Escheatment or unclaimed property
• Uncleared checks address within 30 days of issuance
• EFT’s eliminate escheatment
Debit Balance/Escheatment
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Debt balances and the escheatment process, should be managed
through all of the following techniques except:
a) Timely follow-up with the supplier
b) Decreased amount of EFT’s
c) Resolve uncleared checks, 30 days after issuance
d) Handle escheatment process per the state regulations
Polling Question #3
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Debt balances and the escheatment process, should be managed
through all of the following techniques except:
a) Timely follow-up with the supplier
b) Decreased amount of EFT’s
c) Resolve uncleared checks, 30 days after issuance
d) Handle escheatment process per the state regulations
Polling Question #3
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• Established controls for invoice processing
• Aligned with Generally Accepted Accounting Principles
• Tied to the Foreign Corrupt Practices Act (FCPA)
• Support documentation including approvals
Due Diligence
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• Strong partnership with purchasing and operations
• Work together to resolve disputes and to develop corrective actions
• Communicate working capital plan to Treasury
Improved Teamwork
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• Supporting Documentation
• Out-of-cycle check requests
• Positive pay files
• Real-time access to invoices
• Procurement Card statements, reports, and receipts
• Travel and Entertainment statements, reports, and receipts
Green Solutions
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• Cost Per Invoice
• % of disputes
• Cycle time to process
• % of discounts taken
• % of electronic invoices
• # of duplicate payments
• # of late payments
• Invoices processed per FTE
• # of electronic payments
Metrics
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• Importance of the accounts payable function
• Analytical versus transactional thinkers
• Total working capital
• Automation and technological solutions
• Streamline and efficient processes
• AP is the last stop prior to a payment being sent to a supplier
Conclusion
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Questions?
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