Transforming Accounts Payable from Cost Center to Profit Center in Higher Education

Transcription

1 Transforming Accounts Payable from Cost Center to Profit Center in Higher Education Ian Paul Da Costa Manager, Accounts Payable University of California, Los Angeles (UCLA)

2 Agenda Objectives How a Purchase Card Program Can Support AP Transformation Implementing Change to Facilitate Transformation Other opportunities Strategic Sourcing Agreements Buying Consortiums Spend Analytics Payment Efficiencies Study

3 How your Purchase Card program can support AP transformation

4 Accounts Payable Analysis AP file to identify card accepting merchants still paid by check Matched against association s merchant list Reporting based on check tiers $1 $2,500 $2,501 $10,000 >$10,000 Move appropriate spend to cards or epayables reducing invoice traffic and increasing revenue share

5 Current Climate Higher Education budgets under significant strain State funding historically reduced due to revenue shortfalls Pressure across all non educational departments to reduce costs and improve efficiency Card programs provide significant opportunity to address the situation and more importantly, drive revenue

6 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 reconciliation Allows for payment diversion and revenue increase Identifies potential cardholders in invoice generating department

7 Payment Analytics Provider offered purchase card audit engines Allows you to create rules and exceptions to monitor card spends Weekend charges Split transactions High risk MCC identifications Automatic notification for review and action Moves AP staff from batch processing to value added audit role

8 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 Dramatic revenue share increase potential as the process targets higher spends AP critical player in development/implementation

9 1099 Reporting Relative to Purchase Cards Institutions relieved from 1099 reporting on card spends Merchant processing banks responsible to report all spends and 1099 information Opens up an enormous service related spends category for card usage Increased revenue Allows refocus in AP

10 Speed of Pay (SOP) Manipulation Cash flow becoming an important focus in difficult budgetary times. Card programs typically offer additional variable incentives for SOP SOP incentives at present are most likely better then returns available for conserving cash AP plays a major role in prioritizing card payments to support initiative.

11 Implementing Change to Facilitate Transformation: A Case Study

12 Background UCLA Accounts Payable Main campus, UC Merced and UC Office of the President (Oakland) Metrics (FY13) Annual: 454,788 paper invoices; 205,332 electronic transactions Monthly range: 43,424 72,962 (combined paper and electronic ) Budget $3.1 million; 32 FTE Procurement Card Small program: 450 cardholders; $5.5 million AP reviews for policy compliance and use tax accruals Departments required to create orders in our eprocurement system Budget Issues University System s Working Smarter initiative streamline operations identify revenue opportunities Identify cost savings 12

13 Continuous Improvement Implemented a vendor portal to speed up processing and improve discount opportunities Created daily reports to identify missed available discounts Priority and resources given to EDI, vendor portal (invoicing), ACH & card adoption (payments) Work with Purchasing/Strategic Sourcing to identify incentives and early pay opportunities Automated process to return incentives to federal funds 13

14 Continuous Improvement Worked with key areas on central billing to reduce invoice volume (e.g. campus telecommunications ) Perform cost benefit analysis: early pay, patronage incentives vs. cards (Must be ongoing) Formed project teams Customer Satisfaction Employee Satisfaction Invoice Automation Payment Efficiencies (ACH, Credit Card & Discounts) Operations (planning, staffing & forecasting) 14

15 Payment Analysis UCLA s internal process Top 50 vendors (fully integrated automation procure to pay) File specifications from card provider IT resources to develop file Review data Webinar or in person presentation is better Bring the right players to the table Recognize limitations of process (vendor might accept cards for certain consumer transactions but not regular bill payments. e.g. LA DWP) 15

16 AP Analysis Results Over 180 UCLA vendors were already on epayables with our bank provider Analysis identified over $53M in check and ACH payments to vendors on the program Savings in payment method in addition to incentives earned * * Source: Aberdeen Group, May 2010 * Aberdeen Group

17 Our Process Looking for automation opportunities Reviewed invoices Asked Do you take credit cards? Took ownership of conversion Asked vendors again Partnered with our card provider and Purchasing/Strategic Sourcing 17

18 Key Benefits Small investment Programming Staff time Infrastructure changes Potentially large return Incentives Reduced payment costs Banking on the future Cover program expenses 18

19 c4 Our Key Suppliers Law firms patent attorneys related to research intensive University system and subsequent royalty payments Scientific companies Copier leases steady revenue stream Technology companies Cylinder gas suppliers Hotels (Events) 19

20 Slide 19 c4 I'm assuming this is tied to the notions around being surprised about the types of merchants that could accept card payments. If so, then I suggested a retitle of this slide. cjcoll1, 2/18/2011

21 Program Growth Launch Month # Vendors # Transactions Amount 10 Oct , * 20 3,137 2,092, ,422 26,342, ,610 40,324, ,387 55,125, GOAL: 60,000,000 * Partial Year (Oct Dec) 20

22 Payback In CY13, $719K in incentives for epayables vs. $100K for other programs (approx.) Using some incentives to fund activity: Staffing Training Supplies & Expenses Program already larger than our p card program Don t need to issue 1099s 21

23 Challenges Overcoming internal resistance Not what we were used to doing Focus on automation, missing the low hanging fruit Concerns about controls Overcoming external resistance Vendor concerns about fees Be willing to revisit payment terms (Dynamic Discounting) Promise of faster turnaround Banking issues Does the vendor s merchant bank have velocity or dollar limits Initial concerns by vendor s card processor about legitimacy of transactions Vendor turnover in AR department Establish controls to prevent card fraud (a learning process) Regulatory issues Fees for credit cards or two tier pricing 22

24 Recommendations Understand the process Working with card provider was key to success Payment analysis Identify potential vendors Review invoices Does the invoice show credit card info Ask, ask, ask.. Do you take credit cards? Ask your colleagues (industry groups, PDG conferences etc.) Perform cost benefit analysis: early pay, patronage incentives vs. cards AND monitor pricing Just Do It! 23

25 Other Opportunities Strategic Sourcing Agreements Buying Consortiums Spend Analytics Payment efficiencies study 24