Seven simple changes to accounts payable that can add value to your shared services
Finance shared services
At last month’s US Summit for Leaders in Finance Shared Services in Atlanta, Mary Schaeffer, Editorial Director of AP Now and Tomorrow, and Eric Jones, Director of Corporate Payables at Lowe’s, shared with our audience their top 7 techniques for adding value to shared services centres through changes to their accounts payable function.
After a successful career in finance, Mary focussed her attentions on writing and consultative work. She has since published over 15 business books, including ‘The CFO and Controller’s Guide to Accounts’ and ‘Fraud in Accounts Payable: How to prevent it’. Eric, as Director of Corporate Payables, oversees the process behind an approximate 20m financial transactions a year at Lowe’s. In this role, he has managed to see that around 99% of invoices are processed automatically reducing cost per transaction to less than $1, 99% of debts are paid on time, and 97% of invoices have a first time match rate.
So what top tips have Eric and Mary relied on to realise such results?
1. Employ rigid coding standards. Invoice processing and data entry, and master vendor file management are two areas where creativity should without a doubt be discouraged. As Mary warned, the majority of fraud attempts start with an honest mistake, so don’t assume that everyone shares your common sense interpretation of information. Duplicate payments, duplicate vendor master data and weak controls are all potential holes through which fraud can slip.
2. Recover funds turned over to the state. Unless you are employing rigorous audit and recovery procedures, it is likely that a few pounds or dollars here and there have been forgotten about. If you’re based in North America, it will be well worth your time checking out missingmoney.com – a website dedicated to locating lost, misplaced or unclaimed assets and money, for example stocks and dividends, insurance policies, tax rebates and unpaid cheques.
3. Recover duplicate payments. Duplicate payment is a common issue for many organisations. For Eric, this is a two-step process: First, find the low hanging fruit yourself, then call in the experts to track down the harder to find duplicates. “While employing consultants might seem like a large cost, you’ll never know what the cost of not hiring them may be”, Eric explained. “You can learn from what they do and build those routines yourself more cost effectively. No matter how clean your processes are, it’s always good to have a third party come and look over your shoulder every now and again”.
4. Recover all vendor credits. As Mary stated, “Who understands credit memos?” Credit memos are often confused with invoices, so it’s vital that your accounts payable staff are trained in exactly how to handle and process them. Recovering vendor credits is important because auditors will ask for unrecovered credits and any accrued late fees will eat into the unrecovered credits.
5. Leverage your financial supply chain. “The only mortal sin is to miss an early payment discount”, stated Eric. “By implementing dynamic discounting initiatives in your organisation, you can leverage your supply chain to realise significant financial gains, as it’s a win-win situation for both buyer and supplier”.
6. Utilise supplier web portals. “Technology is an enabling force in terms of helping your suppliers to add value to your organisation”, said Eric. At Lowe’s, he explained, they greatly reduced the amount of time spent on supplier queries as the portal was designed to support a high level of self-service for the suppliers. This not only increased communication and therefore the business relationship between Lowe’s and their suppliers, but also brought up the standard of their master data (as suppliers were updating it themselves) and reduced the instances of fraud.
7. Monitor compliance tightly. As Mary and Eric pointed out, while it is important to make sure that internal compliance procedures are stuck to, there are plenty of resources available externally to help tighten them up. The Office of Foreign Assets Control (OFAC) and the IRS Taxpayer Identification Number (TIN) matching system are both good examples ways to check your vendors or would-be vendors are legally compliant. Cross-referencing your master data is easy, and could root out potential problems”, said Eric.
If you want to break through the glass ceiling on the value your accounts payable department can add to your organisation, come to the Accounts Payable Tech and e-Invoicing Summit 2012. Meet over 70 of your end-user peers from companies such as Unilever, Transport for London, John Lewis, Vodafone and Hewlett Packard, to share best practice techniques and hear how they have overcome common challenges. View the agenda or to reserve your place get in touch at email@example.com or on +44 (0) 203 751 2333.