Santa Seethaler Comes Early – with a sleigh full of low-tech tricks for high-value AP performance

Really … a Billion a Day In addition to reindeer hoofs flying through the air this season, invoices by the billions are coming in by plane, train, truck … or not at all, at least not physically. With roughly one billion invoices sent every day of the year, worldwide, our individual processes to receive, validate, approve, match, process, and pay these invoices timely are constantly strained. Given increasing volumes (and often decreased headcount) it’s tempting to fold, staple, spindle or otherwise mutilate the never-ending flow – but we’ve read too many warnings against such violent behavior. Besides, vendor invoices and payment requests aggregate to comprise very significant segments of our annual financial reporting. While unfilled purchase orders represent mostly un-booked contingent obligations, received goods and services – evidenced by vendor invoices – increase assets, add to expenses, identify liabilities, and drain cash. And whereas entities are unlikely to overstate/over-accrue year-end obligations, without diligence by everyone involved in the procure-to-pay cycle, costs and obligations are easily understated – even materially so. And that foretells trouble. Chief Irritant Among the Chiefs According to research published by the Aberdeen Group1, document visibility is the #1 frustration that companies have with their AP operations. Interesting. One would naturally think that AP operating costs, personnel turnover, or mistakes would cause more concern. But it’s visibility – or the lack thereof. Efficiencies, improved cash management, and document management are next in order … followed by improved controls and the proper application of available discounts. It’s quite a list. Source: Aberdeen Group (click to enlarge) While we would naturally tend towards implementing electronic and automated processes to improve AP performance in all the above categories, let’s turn Santa’s sleigh in mid-flight. You see, for too many companies still on the sidelines, invoice automation is on the Christmas wish list – but with little chance of delivery this year. So what to do? Today, While the Sun Shines I appreciate the wisdom of Albert Einstein who admonished his fellow man to "Learn from yesterday, live for today, hope for tomorrow". Let’s apply the formula to your Accounts Payable operation. What do you already know, maybe have known for some time, about the backlogs and pressure points? Where are the complaints, and who are the complainers? What are the recurring problems? All of that is "yesterday". Things that you can’t impact now include: systems that are un-purchased and unproven; restructuring left unstructured; skills that remain un-hired … these go on the Wish List, the Master Plan, the Strategic Initiatives presentation. That leaves today, or in Einstein’s words, the opportunity to live for today. What can we do to improve visibility, increase efficiency, better contribute to corporate cash management, and otherwise enhance our payments operation by addressing the survey results above, and our own issues? In the spirit of Christmastime list-making, let me give you a handful of practical suggestions from which I encourage your Ã¢ la carte selection. Santa Seethaler's 10 low-tech ideas for high-value AP performance 1. Do it now. My experience with running thousands of payment documents through an AP operation weekly is that you cannot afford to fall behind. Do today’s work today. Make it a matter of policy and a matter of pride. 2. Contract with your customers. Disappointment follows unmet expectations. And, absent any formal level-of-service agreement, customers set their own expectations, which may not be achievable. Identify your provisions and your pledges. For example: Qualified items received by noon today will be entered by the following business day. Establish and communicate other simple and workable statements concerning vendors and payment processing. 3. Manage exceptions. This implies both a standard process (one covered by the customer contract) and the means and manpower to manage something non-routine. Same-day wire payments, rush processing, etc. can be accommodated – but should not be done at the expense of your commitment to all customers. A clear command for exception management (personnel, process, timing, systems) will free productive operators to meet their daily expectations. 4. Manage through metrics. I’ve seen the implementation of performance metrics improve personal productivity in AP operations by about 30%. It is important to a) establish the goals as a team, showing flexibility until refined, b) develop the means to accurately track performance, c) post the daily performance publicly, and d) use the results intelligently to motivate and facilitate improvement as warranted. 5. Utilize systems more completely and exclusively. Often times, the cow path is paved – despite the fact that new-generation systems are functioning and could be more fully utilized … if standards of use were established. Question non-standard processing and work with the offenders to help your organization gain the benefits of efficiency and visibility. 6. Communicate with your community. If people around your organization are calling Mary or Bob in AP for answers, you’ll never achieve a level of efficient operations that will meet your efficiency goals. Establish an AP help line, and (more importantly) a monitored email account. Rotate individuals to respond to these requests within your committed response times, and credit their actions as transactional activity. 7. Deputize departmental researchers. Accountants, analysts and others are often calling AP for information. Channel and categorize the calls in order to determine what tools (view rights, etc.) can be shared with those who presently have AP on their speed dial. 8. Tweak the transmittals. Short of a wholesale forms re-write, you might standardize or optimize internal documents – transmittal cover sheets, reimbursement requests, wire-out, or even vendor set-up and change documentation. 9. Calendar the close. ERP system processors maintain elaborate, sequential closing calendars. Backing up from their processes, publish the AP submission and closing dates – preferably within the systems calendar for added credibility. There is power when the rules are written. 10. Pick-out the post-period payments. Inevitably, even with extended period-end payment processing, items belonging to the prior period will be presented. Work out an established monetary threshold with internal audit and instruct operators to be aware of (and separately list) qualifying invoices for a stated length of time. This partnership will cost you little, but greatly assist the corporate cut-off and accrual requirements. As a Christmas bonus (per #8 above), you’re welcome to download our standardized vendor set-up document, elements of which may be valuable if you are considering any improvements to your own data collection and input for valid vendor maintenance. A Christmas wish to you: may your closing be smooth. [inlinead] Footnotes: 1. Aberdeen Group: Invoicing and Workflow: Transforming Process Automation into Operational Cost Control

Santa Seethaler Comes Early – with a sleigh full of low-tech tricks for high-value AP performance

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