Transforming Accounts Payable from Cost Center to Profit Center in Higher Educa;on

Transcription

1 Transforming Accounts Payable from Cost Center to Profit Center in Higher Educa;on Ian Paul Da Costa Manager, Accounts Payable University of California, Los Angeles (UCLA) Robert Hebert Regional Vice President U.S. Bank Corporate Payment Systems

2 How your Purchase Card program can support AP transforma;on Robert Hebert Regional Vice President U.S. Bank Corporate Payment Systems

3 Accounts Payable Analysis MRO AP file to idenify card acceping merchants sill paid by check Matched against associaion s merchant list ReporIng based on check Iers $1 - $2,500 $ $10,000 >$10,000 Move appropriate spend to cards or epayables reducing invoice traffic and increasing revenue share

4 Current Climate Higher EducaIon budgets under significant strain State funding consistently reduced and reduced again mid- year due to revenue shorualls Pressure across all non- educaional departments to reduce costs and improve efficiency Card programs provide significant opportunity to address the situaion and more importantly, drive revenue

5 Accounts Payable Cards Purchase cards held in AP Used to pick off and pay invoices where the merchant accepts cards Does require some extra- normal reconciliaion Allows for payment diversion and revenue increase IdenIfies potenial cardholders in invoice generaing department

6 Payment AnalyIcs Provider offered purchase card audit engines Allows you to create rules and excepions to monitor card spends Weekend charges Split transacions High risk MCC idenificaions AutomaIc noificaion for review and acion Moves AP staff from batch processing to value added audit role

7 epayables Allows all current up- front processes to remain PO, Receiving, Invoice processing When check run batch is processed, diverts selected supplier invoices to Provider output file Provider processes those invoices on ghost accounts DramaIc revenue share increase potenial as the process targets higher spends AP criical player in development/implementaion

8 Recent Changes to 1099 ReporIng RelaIve to Purchase Cards InsItuIons now relieved from 1099 reporing on card spends Merchant processing banks responsible to report all spends and 1099 informaion Opens up an enormous service related spends category for card usage Increased revenue Allows refocus in AP

9 Speed of Pay (SOP) ManipulaIon Cash flow becoming an important focus in difficult budgetary Imes. Card programs typically offer addiional variable incenives for SOP SOP incenives at present are most likely be`er then returns available for conserving cash AP plays a major role in prioriizing card payments to support iniiaive.

10 Implemen;ng Change to Facilitate Transforma;on Ian Paul Da Costa Manager, Accounts Payable University of California, Los Angeles (UCLA)

11 Background UCLA Accounts Payable Main campus, UC Merced and UC Office of the President (Oakland) Metrics (FY11) Annual: 514,512 paper invoices; 205,332 electronic transacions Monthly range: 53,267-74,696 (combined paper and electronic ) Budget $2.1 million; 32 FTE Procurement Card Small program: 388 cardholders; $4.5 million for the period 1/11 12/11 Managed by Purchasing; AP reviews for policy compliance and use tax accruals Departments required to create orders in our eprocurement system Budget Issues University System (UC) facing cuts in State funding Need to streamline operaions Need to idenify revenue opportuniies Sop Hiring Freeze 11

12 Con;nuous Improvement Implemented a vendor portal to speed- up processing and improve discount opportuniies Created daily reports to idenify missed available discounts Priority and resources given to EDI, vendor portal (invoicing), ACH & card adopion (payments) Work with Purchasing/Strategic Sourcing to idenify incenives and early pay opportuniies Automate process to return incenives to federal funds Work with key areas on central billing to reduce invoice volume (e.g. campus telecommunicaions ) Perform cost benefit analysis: early pay, patronage incenives vs. cards Manage payables 12

13 Payment Analysis UCLA s internal process Top 50 vendors (fully integrated automaion procure to pay) File specificaions from U.S. Bank IT resources to develop file Review data Webinar or in- person presentaion is be`er Bring the right players to the table Recognize limitaions of process (vendor might accept cards for certain consumer transacions but not regular bill payments. E.g. LA DWP) 13

14 AP Analysis Payment Plus Results Over 180 UCLA vendors are currently on U.S. Bank Payment Plus Analysis idenified over $53M in check and ACH payments to vendors on the program Savings in payment method in addiion to incenives earned * * Source: Aberdeen Group, May 2010 * Aberdeen Group 14

15 Our Process Looking for automaion opportuniies Reviewed invoices Asked Do you take credit cards? Took ownership of conversion Asked vendors again Partnered with U.S. Bank and Purchasing/Strategic Sourcing 15

16 Key Benefits Small investment Programming Staff Ime Infrastructure changes PotenIally large return IncenIves Reduced payment costs Banking on the future Cover program expenses 16

17 Key suppliers for UCLA Law firms patent a`orneys related to research intensive University system and subsequent royalty payments ScienIfic companies Copier leases steady revenue stream Technology companies Cylinder gas suppliers 17

18 Program Growth Month # Vendors # Transac;ons Amount 10- Oct , Dec 15 1, , Mar 41 4,317 2,166, Jun 41 5,202 2,615, Sep 50 7,316 2,490, Dec 53 6,030 2,397, Feb 53 7,177 2,567,806 18

19 Payback In CY11, $464K in incenives for Payment Plus vs. $165K for other programs Using some incenives to fund acivity: Staffing Training Supplies & Expenses Program already larger than our p- card program Don t need to issue 1099s 19

20 Challenges Overcoming internal resistance Not what we were used to doing Focus on automaion, missing the low- hanging fruit Concerns about controls Overcoming external resistance Vendor concerns about fees Be willing to revisit payment terms (Dynamic DiscounIng) Promise of faster turnaround Banking issues Does the vendor s merchant bank have velocity or dollar limits IniIal concerns by vendor s card processor about legiimacy of transacions Vendor turnover in AR department Establish controls to prevent card fraud (a learning process) 20

21 Recommenda;ons Understand the process U.S. Bank team was key to success Payment analysis IdenIfy potenial vendors Review invoices Does the invoice show credit card info Ask, ask, ask.. Do you take credit cards? Ask your colleagues (industry groups, conferences, IFO, NAPCP) Just Do It! 21