The State of Vendor Management November 20, 2013 Presenter Jeff Ulanoski Lavante
Agenda Introductions The Supplier Management Survey Lavante 7 Best Practices for Process Improvement Recommendations What Can We do About It? Questions 2
Introductions The Panelists Jeff Ulanoski Senior Manager, Client Services Jeff.ulanoski@lavante.com Jeff is a veteran accounts payable professional and leads the client services team working directly with Lavante s customers. Prior to Lavante, Jeff was with Rite Aid Corporation for more than ten years leading the company s Accounts Payable and Transaction Tax organizations. During his tenure he introduced technology enabled solutions and best in class processes to improve corporate efficiency, reduce costs, increase cash flow and mitigate risk. Jeff holds a bachelor s degree in accounting from Bloomsburg University. See more at: http://www.lavante.com/managementteam#sthash.vl5q8ccf.dpuf. 3
AP & Automation AP has been a target of technology solution providers Because our processes are so manual & paper intensive & costly & prone to errors The focus has been on the invoice processing side and to a lesser extent on payment processing But there is another fundamental AP process that has been neglected in terms of automation Managing the vendor master file 4
The Master Vendor File is the Foundation of AP A clean, complete, & up to date vendor file decreases risk of fraud, non-compliance, and duplicate payments at a minimum Enables us to pay our vendors properly And provides the opportunity for increased discount capture Yet 76.8% of respondents use little or no automation when adding new vendors And it s at the point of adding new vendors that we make or break the VMF Not to mention managing the almost constant changes 5
And We Manage it the Hard Way Lack or Presence of Automation for 13 Vendor Management Tasks 1 Completely Manual 2 3 4 5 Completely Automated Adding new vendors New vendor approval Managing vendor file changes Supplier document management Continuous statement audit / open credit recovery Managing supplier communication campaigns Managing preferred payment method Supplier payment inquiries Continuous third party validations Diversity tracking Identifying duplicate & related vendors Segregation of duties 61.9% 60.2% 60.0% 56.3% 52.3% 51.8% 46.4% 46.1% 45.0% 43.1% 38.5% 29.7% 2.8% 6.4% 3.9% 3.4% 6.6% 5.3% 7.8% 7.2% 7.7% 8.8% 6.7% 14.0% Duplicate payment audits 28.6% Percentage of Respondents 12.4% 6
What Respondents Actually Said Segregation of duties controls are difficult and need reporting Standardization and normalization are crucial Duplicate vendors are a major concern Preventing creating new ones Identifying existing duplicate ones Third party validations are too labor intensive OFAC / SDN, EPLS, OIG, USPS Desirable tasks such as diversity and Insurance certification tracking goes undone Every AP department is different -- there were almost as many needs listed in the comments as there were survey respondents 7
2014 The Year of Strategic Projects Lavante Recommends 7 Areas to Improve processes and controls 1) W9 W8 process overhaul TIN Verification W8 FATCA compliance 2) Vendor master cleanse process 3) Reduce duplicate payments 4) Promote Banking initiatives ACH, P-card 5) Supplier data collection Contact, Addresses, Details 6) Supplier Document Collection Contract, COI, Diversity, Certificates 7) Third party validation integration IRS, OFAC / SDN, USPS, EPLS 8
Common Elements of the Strategic Projects The Communication Problem Communication Multiple departments Diverse supplier population Data constantly decays Data frequently changes Compliance to internal controls requires multiple manual touches 9
The Communication Solution Inexpensive Intelligent Automation Leverage contact information Controls driven Establish configurable workflows Utilize multimode outreach Cross company visibility Real-time reporting 10
SP #1 - W9 / W8 Process Overhaul Best Practice: Establish TIN number collection / validation process during on boarding Collect W9s for suppliers every three years and validate annually Provide corporate policy for W8s and inform suppliers where to submit forms. Review W8s received to make sure the proper W8 is filled out W-8BEN, W-8CE, W-8ECI, W-8EXP, W-8IMY Lavante: Collect W9s and W8s as part of on boarding process W9 Validation through the Lavante Application Review W8s through 3 rd party integration Set up workflows to request and collect documents as needed 11
Lavante Integrated TIN Solution ABC SOULTIONS, INC. ABC 555 555 1234 SOLUTIONS, INC. Legal ID by Status 555 555 1235 ABC_Solutions_w9_2013.pdf TIN Automatically Validated with IRS Passed Failed Supplier Detail Record Updated W 9 PDF files uploaded to Document Repository by Supplier Real Time Supplier Compliance Dashboard W 9 From Document Repository 12
SP #2 - Vendor Master File Cleanse Best Practice: Develop auditable roles based segregation of duties controls Establish a repeatable process to on-board new suppliers Establish a pro-active process to eliminate duplicate suppliers Allow suppliers to update their own information real-time Lavante: Co-configure system wide controls Real time integration with third parties to validate supplier data Compare existing suppliers against Lavante s existing supplier network Suppliers have the ability to maintain their own data Easy ERP integration eliminates the need for future VMF cleansing 13
Auditable Vendor Master Controls Audit Historical Info Outreach Approval Stage progress Quick progress visibility Progress Completes Real Time Supplier Compliance Dashboard Supplier Compliance W 9 From Document Repository 14
SP #3 - Duplicate Payment Reduction Best Practice: Established detailed internal controls for all data entry Establish controls on VMF to reduce duplicate suppliers Conduct annual duplicate payment review and review supplier statements Lavante: Conduct a duplicate payment audit Establish supplier statement controls / reporting Compare suppliers to Lavante s supplier network; identify potential duplicates Connect with suppliers to validate parent / child relationships 15
SP #4 - Banking Initiatives ACH/P Card Best Practice: Establish an auditable process to limit fraud possibilities Offer incentive to convert to preferred payment terms Communicate regularly with non compliant suppliers Lavante: Provide secure online bank number change management Reduce risk Reduce Escheatment Payments Configurable supplier outreach to promote bank initiatives Reduce Check printing Increase Rebates Configurable outreach to promote preferred payment terms. 16
SP #5 - Supplier Data Collection Best Practice: Define information needed before payment is made Collect all required supplier information at time of supplier setup Store information in central location Validate any / all information with 3rd parties Lavante: Configure global data controls Enforce mandatory field input / collection configuration Real-time integration with third parties for data validation Configure workflow to request updated information on an ongoing basis 17
SP #6 - Supplier Document Collection Best Practice: Define all required documents needed from suppliers Create a centralized document repository that can be shared across enterprise Route documents to the appropriate depart for review / approval Define process to collect follow up information once document aged Lavante: Configure global document controls Enforce Mandatory document input / collection configuration Real-time integration with third parties for data validation Configure workflow to request updated data on an ongoing basis Roles based access to documents / approval workflow 18
SP #7 - Third Party Validation Integration Best Practice: Establish list of validations required: Federal, State, Other. Develop automated auditable process to ensure compliance Develop budget to define and build controls Lavante: Configure global 3 rd party integration controls Configure workflow to request updated information on ongoing basis Roles based access to results / approval workflow Enforce schedule of validations o OFAC/SDN - Daily o TIN Validation - Annually o USPS Address validation - Monthly 19
Other Certifications and Initiatives Government regulations will change Proactively manage new certification requirements as they evolve Define custom workflows and data fields now or later Automate outreach to maximize compliance rates Vendors upload documentation directly into your secure portal Strategically manage compliance across supplier network 20
Understanding Your Current Expenses and Processes Supplier Management Cost Analytics Analyze current cost structure by department Identify targeted areas for improvement Establish level of investment against level of savings: Create ROI model Evaluate progress 21
Q&A / Trial Offers Lavante.com/asktheexperts Q&A Next Step: lavante.com/asktheexperts 22
Poll Question Which Strategic Initiatives are Most Important to You? (click all that apply) a. W9 W8 process overhaul TIN Verification, FATCA compliance b. Vendor master cleanse c. Duplicate supplier/payment reduction d. Banking initiatives ACH, P-card e. Supplier data collection Contact, Addresses, Details f. Supplier Document Collection Contract, COI, Diversity, Certificates g. Third party validation integration IRS, OFAC / SDN, EPLS 23
The Obstacles are Always the Same Lack of money for AP projects (cited by 45.1%) AP is far down the overworked and understaffed IT department s list of things to do and departments to please 44.4% cited limited IT resources Lack of management support (cited by 34%) The bills are getting paid They have no idea what s going on behind the curtain And, lurking within that other is the quite basic reason that many respondents just don t know where to start! 24
Poll Question How much do you think you are spending to manage new and existing suppliers per year? $250K - $500K $500K - $750K $750K - $1M >$1M Not Exactly Sure / Don t Know 25
Poll Question What topics would you like to see more information on? FATCA Compliance Emerging Government Regulations FCPA Foreign Corrupt Practices Compliance Conflict Minerals Supplier Analytics / Reporting Diversity Tracking / Reporting Other 26