Procure-to-Pay Best Practices

Transcription

1 ITFMA Conference Procure-to-Pay Best Practices Integrating P2P Best Practices with Technology Chris Evanoff: Principal, Soltec, Inc. 1

2 Presentation Outline Introduction and Background Procure-to-Pay Cycle Adopting Best Practice Strategies for AP Transactions Purchasing and Receiving Best Practices for AP AP Technology Enablers Questions & Answers 2

3 Procure-to-Pay Best Practices Introduction and Background 3

4 Soltec Inc. Consulting Practice Education Implementation To To deliver high-impact business process consulting services and implement industry proven end-to-end Best Practice Solutions 4

5 Soltec s Best Practices Expertise Finance, Accounting, Treasury Supply Management Customer Relation Management Manufacturing Finance, Accounting, Treasury Evaluated Receipts Settlement Procurement Card Financial Closing Shared Services Travel & Expense Reporting Inter/Intra-Company Settlement Supply Management Production Demand Replenishment Material Requirements Planning Material Receiving and Movement Indirect Materials Rationalization Warehouse Management Supplier Quality Process Defective & Damaged Material Process Development and Improvement 5

6 What are P2P Best Practices? A series of policies, procedures and processes that eliminate waste and optimize operating efficiencies in the P2P cycle in order to pay suppliers accurately and on time DISCIPLINE RESULTS RISK TAKING WORK ENVIRONMENT CUSTOMER FOCUS QUALITY P2P BP Supports Company Values 6

7 Procure-to-Pay Best Practices Procure-to-Pay Cycle 7

8 Traditional P2P Cycle Goods and Packing Slip Receiving Receipt S U P P L I E R Shipping Order Customer Service Advice of Shipment Price Accounts Receivable Invoice Payment Accounts Payable Invoice Data Payment Data Accounts Payable System C U S T O M E R Purchase Order / Negotiated Prices Purchasing Price 8

9 P2P Best Practice Opportunities Inaccurate sales information Obsolete Pricing Data Delayed Inaccurate Order Vendor Inquiries & Disputes Excessive Change Orders Wrong Payment Shipping Discrepancies Invoice Entry Receipt Open Receivers Errors Discrepancies 9

10 Procurement Costs Procurement Spends More of of the Revenue Dollar Than Any Other Area 10

11 Procurement Costs Procurement Exerts Far Greater Leverage on Earnings Than Any Other Area 5% Reduction in Procurement 3% Adds to Net Profits 11

12 Procurement Costs Average Cost of of Procurement from Acquisition through Payment Other 20% High $300 Systems 22% Labor 58% Low $25 Purchasing Receiving Accounting 12

13 Labor Cost Per Invoice Paper Invoices 13

14 Invoice Productivity Level per FTE 14

15 Procure-to-Pay Best Practices Adopting Best Practice Strategies for AP Transactions 15

16 Transaction Types Non-Inventory (POs), 20% Check Requests, 5% Non-PO Invoices, 10% Payroll Deductions, 2% Utilities, 3% Inventory, 50% Production, Direct Materials, SKUs MRO Materials Service Rentals, 5% T&E, 5% 16

17 Procure-to-Pay Alternatives ERS ERS Non-Inventory 5-10% 25-30% 10-20% Purchasing Card Non-Inventory Misc Expense Materials Construction & Capital Rentals & Leases Services Inventory Production, Direct Materials, SKUs MRO Materials 50-60% Apply Best Practices Other Travel Expense Reports Payroll Deductions Check Requests Utilities 17

18 Manual Three-Way Match Imaging and Workflow Processing Options for PO-Based Transactions Optical Character Recognition (OCR) Electronic Invoice Presentation and Payment Electronic Data Interchange (EDI) Evaluated Receipt Settlement (ERS) Non-Inventory (POs), 20% Inventory, 50% 18

19 What is ERS? ERS is NOT About: Software Imaging and Workflow Electronic Data Interchange (EDI) Electronic Invoice Presentation and Payment (EIPP) ERS IS About: Elimination of the Invoice from the Procurement and Disbursement Process ERS is a process that allows a customer to make Transforming AP From Transactional Processing to Analysis, Control And Reporting supplier payments based on its records and not by Establishing a High Performing Partnership between Purchasing, Receiving, AP and Suppliers relying on supplier invoices (paper or EDI) 19

20 Traditional Disbursement Process Goods and Packing Slip Receiving Receipt S U P P L I E R Shipping Order Customer Service Advice of Shipment Price Accounts Receivable Purchase Order / Negotiated Prices Invoice Mismatches Mismatches Payment Accounts Payable Invoice Data Payment Data Mismatches Purchasing Price Accounts Payable System C U S T O M E R 20

21 ERS Process Goods and Packing Slip Receiving Receipt Qty S U P P L I E R Shipping Order Customer Service Advice of Shipment Price Accounts Receivable Purchase Order / Negotiated Prices Payment Purchasing AP Receipt Evaluation Price / Term C U S T O M E R 21

22 ERS Process S U P P L I E R Shipping Order Customer Service Evaluate Receipt at PO Unit Price Goods and Packing Slip Use Packing Slip No. as Invoice No. Use Advice Receipt of Date as Shipment Invoice Date Establish Accounts Payment Receivable Due Date based on PO Term Price Purchase Order / Negotiated Prices Payment Receiving Purchasing Receipt Qty AP Receipt Evaluation Price / Term C U S T O M E R 22

23 Present Disbursement Process PURCHASE ORDER Currency Payment Terms Supplier Code Part Number Purchase Order No. Unit of Measure Quantity Price PACKING SLIP Supplier Code Part Number Purchase Order No. Unit of Measure Quantity Shipment ID No. Ship/Received Date INVOICE Currency Payment Terms Supplier Code Part Number Purchase Order No. Unit of Measure Quantity Price Invoice No. Invoice Date When All Match Generate Payment 23

24 ERS Process PURCHASE ORDER Currency Payment Terms Supplier Code Part Number Purchase Order No. Unit of Measure Quantity Price PACKING SLIP Supplier Code Part Number Purchase Order No. Unit of Measure Quantity Shipment ID No. Ship/Received Date Packing Slip No. Bill of Lading No. Customer Order No. PRICE X QUANTITY = PAYMENT TO SUPPLIER 24

25 ERS Functional Requirements Purchasing P.O. P.O. Price Price Unit Unit of of Measure Measure Misc. Misc. Charges Charges Special Special Pricing Pricing Freight Freight Terms Terms Price Price Adjustments Adjustments Receiving Standard Standard Receipt Receipt Verification Verification Receipt Receipt Discrepancy Discrepancy Returns Returns Accounts Payable Payment Payment Terms Terms Payment Payment Schedule Schedule Remittance Remittance Advice Advice Analysis, Analysis, Reporting Reporting and and Controls Controls 25

26 ERS Benefits Improved: Reduced: Elimination of: Working Capital Receipt Discrepancy Process Defective Material and Returns Process BOM Prices and Quantitative Records Mailing and / or Data Transmission Costs Data Entry, Imaging and Clerical Costs Reconciliation of Price and Quantity Records Forms and Stationery Costs Freight Costs Lost and Duplicate Invoices Lost Discounts Miscellaneous Charges Prepaid and Add Freight Terms Monthly Liability Accruals 26

27 Manual Three-Way Match Imaging and Workflow Processing Options for Non-Inventory (POs)Transactions Optical Character Recognition (OCR) Electronic Invoice Presentation and Payment Electronic Data Interchange (EDI) Check Requests, 5% Purchasing Card Non-Inventory (POs), 20% Utilities, 3% Non-PO Invoices, 10% Service Rentals, 5% 27

28 What is the Purchasing Card? A process that allows a company to to utilize Retail Electronic Payment Networks to to pay suppliers for goods and services ordered without the issuance of of Purchase Orders, Invoices and Checks. Authorized end-users order directly from the supplier. 28

29 Purchasing Card Detail Process Ship Materials Receiving Receiving Materials S U P P L I E R Shipping Shipping Order Customer Customer Service Service Advice of Shipment A/R A/R Price Request Payment Billing Statement G/L G/L Card Card Provider (Bank) (Bank) AP AP Account Data Payment Detail Statement Resolution Dept. End-User C U S T O M E R Place Order 29

30 Purchasing Card Benefits Customer: Reduces Process and Transaction Costs in Purchasing, Receiving and AP Reduces Check Processing Costs Bank Rebates for Purchases Reduces Expenditure Costs Accurately States Month End Expenses End Users: User Empowerment Reduced Workload Faster Delivery Assured Delivery Suppliers: Improves Cash Flow by Providing Faster and More Predictable Payment Eliminates Billing and all Associated Costs 30

31 Options for Non-PO Transactions Purchasing Card Online Check Requests Repetitive Payment Process Imaging and Workflow Monthly Drafts for Utilities Automatic Feed from Payroll System Check Requests, 5% Non-PO Invoices, 10% Service Rentals, 5% T&E, 5% Payroll Deductions, 2% Utilities, 3% 31

32 Procure-to-Pay Best Practices P2P Technology Enablers 32

33 P2P Cycle Technology Enablers S U P P L I E R Shipping Order Customer Service / Sales Shipment Status Discrepancies Advice of Shipment Price Accounts Receivable Order Confirmation Electronic Orders Receiving Invoice Status Payment/Remittance User / Purchasing Discrepancies Receipt Price Accounts Payable Discrepancies C U S T O M E R 33

34 Supplier Portal Role in P2P S U P P L I E R Reporting Shipping Customer Service / Sales Purchase Order Receiving Discrepancies Remittance Advice Shipping Status Accounts Receivable Payment Discrepancies Order Confirmation Supplier Portal Supplier Portal Shipping Status Order Confirmation Payment Discrepancies Receiving/Quality Receiving Discrepancies Discrepancies Remittance Advice Accounts Payable Purchase Order/Revisions Receiving User / Purchasing Reporting C U S T O M E R 34

35 P2P Automation Principles CAPTURE MANAGE ACCESS 35

36 Ideal System Supplier System Document Workflow Archive Electronic Documents Indexes Full Full Text Text Fields Fields Data Entry 3 Way Match 2 Way Match Internal financial reports Approver 1,2, Vendor invoices Web based forms PDF, Text, XML, EDI, , Word, Excel, Approver 1,2, Data from ERP Data to ERP Pay Invoice 100% accurate No human intervention Printing and distribution cost savings Workflow automation & Archive benefits E R P 36

37 Paper Handling Supplier System Document Workflow Archive Paper documents scanned internally Indexes Full Full Text Text Fields Fields Data Entry 3 Way Match 2 Way Match Index documents Barcode automation Data population downloaded from ERP system OCR Manual entry Approver 1,2, Data from ERP Approver 1,2, Data to ERP Pay Invoice Human intervention for scanning and indexing Some time to process Workflow automation & Archive benefits E R P 37

38 Procure-to-Pay Best Practices Q & A Chris Evanoff Soltec, Inc. (248)