2400 Boston St Suite 407 Baltimore MD, (410) AP Optimization Building a World-Class Accounts Payable Operation By Brian Rosenberg – June 8 th, 2007

KMLUG - 06/08/20072 Components of AP Optimization Reducing the Workload Leveraging Advanced Technologies Improving Customer Satisfaction Improve Invoice Matching Success Audit-Proof your Department Improve Financial Results Continuous Improvement

KMLUG - 06/08/20073 Patient Refunds –Process through cash ledger –Bypass AP –Keep the vendor file size in-check Employee Expenses –Best practice: Process through payroll EDI –Expand use of EDI for PO vendors –Consider GHX or other solution to expedite EDI expansion Reducing the Workload

KMLUG - 06/08/20074 Purchasing Cards –Reduced transaction volume –Faster payment –Obtaining Executive acceptance –The importance of good controls Dont believe the sales pitch –Its not about rebates Reducing the Workload

KMLUG - 06/08/20075 Imaging –Document Imaging is vital technology to an AP operation Paperless department Tool to manage resource workloads Eliminate lost invoices –New technologies have long promised to eliminate paper – have they? –Front-end vs. back-end scanning Leveraging Technology

KMLUG - 06/08/20076 Imaging (cont.) –Benefits of Automated invoice approval Faster turnaround of approvals Eliminate finger pointing! Throw away the often ignored signature books Reports can track approval times Use metrics to track requisition to check timeline Leveraging Technology

KMLUG - 06/08/20077 Overview of Invoice Approval Process

KMLUG - 06/08/20078 Imaging (cont.) –Other uses of imaging within Accounts Payable Statements W-9 Forms Recurring payments Packing Lists Leveraging Technology

KMLUG - 06/08/20079 OCR –Secrets of OCR Most use the same technology Its not magic –Explore with realistic expectations High volume vendors should be on EDI, not OCR –See it in action –Dont fire anyone just yet Leveraging Technology

KMLUG - 06/08/ E-payables –Realities of E-payables –Who really pays? Online Forms –Vendor request –Capital request –Employee Expenses Leveraging Technology

KMLUG - 06/08/ Establish a customer service desk –Customer service is a responsibility, not an interruption –Encourage s over phone calls – dont accept faxes –Use generic address –Track calls, but keep it simple –Provide basic customer service/ writing skills to all staff Improving Customer Satisfaction

KMLUG - 06/08/ Statement review is the most proactive task AP can perform! Typically statements are: –Ignored –Thrown away A good statement review process will: –Prevent credit holds –Reduce phone calls –Prevent late fees (if you pay them) –Make your department look good! Improving Customer Satisfaction

KMLUG - 06/08/ Example of statement review process Improving Customer Satisfaction

KMLUG - 06/08/ Review tolerances –Understand how much money falls within tolerance –Spend time on the right problems –Tweak tolerances for best balances of time and money Research your discrepancies for patterns –Same item many times –Same vendors billing incorrectly Improve Invoice Matching

KMLUG - 06/08/ Open lines of communication with Materials –Establish plan to proactively address data issues –Use exception-based reporting to identify problem areas –Create clear roles and responsibilities Create visibility to invoice matching issues –Track and post metrics (RNI over 30 days, INR over 30 days, % of lines with discrepancies) Improve Invoice Matching

KMLUG - 06/08/ Division of Labor –Vendor file controls –Invoice/check division Duplicate Payments –Common causes of duplicate payments Duplicate vendors Keying errors/laziness Audit-Proof your Department

KMLUG - 06/08/ Save 30% - audit the data yourself –Catch it early – quarterly audits –Get the money back – create a clear plan to retrieve identified duplicates –Report the results – show your boss how you saved the company money. Audit-Proof your Department

KMLUG - 06/08/ Duplicate Vendors –Leading cause of duplicate payments –Create clear vendor naming conventions –Limit access to vendor file –Quarterly audits/review –Written plan for how to eliminate duplicates PO Vendors Non-PO Vendors Audit-Proof your Department

KMLUG - 06/08/ Discounts –Should you take an available discount? – Always YES –Monitor discounts lost and find root causes –Work with contracting to negotiate realistic discounts Never negotiate Net 10 –Work with contracting to negotiate more discounts –Create visibility to discounts taken and discounts available. Improving Financial Results

KMLUG - 06/08/ Changing the paradigm of work division Vendors A - L Vendors M - S Vendors T - Z Invoices Received Invoices Entered Vendor-centric Work Division

KMLUG - 06/08/ Changing the paradigm of work division Facility-centric Loc #1 Loc #2 Loc #3 Invoices Received Invoices Entered Work Division

KMLUG - 06/08/ Another View of AP

KMLUG - 06/08/ Establish Metrics –Identify the numbers that really matter –Establish targets –Report results on regular basis –Share metrics with your team and discuss where improvements can be made –Share metrics with management Continuous Improvement

KMLUG - 06/08/ Brian Rosenberg Senior Partner RPI Consultants Tel: Cell: Questions / Open Discussion