While every CFO needs to undoubtedly spend time on strategic & tactical matters, it is also very important to pay attention to timely & accurate processing of vendor payables. Every CFO can, I am sure, recollect one or two or even more payment escalations that have come to either them or at times even the CEO of their company. What follows then is a frenzy of activity to find out which are the invoices pending, where are they lying currently, why were they not paid? More often than not there is a mad scramble to unearth the facts and respond promptly. Now, let’s imagine – what if we could at the click of a button see if invoices have been received for a vendor, view the actual invoice online (if received), ascertain what was the issue with the invoice, how long was it kept pending and when was the query posted back to the vendor? sounds good, doesn’t it? Interested? Then read on.
The enabling of all this is really not very complicated. Lots of companies now use ERPs and these systems can be leveraged to enable all of the advantages stated above; though there are a few corporates that use off the shelf applications to handle invoice processing. While the latter approach reduces the requirement for ERP customization, more often than not, creating a watertight integration layer between the payables front end and the ERP is quite challenging with respect to masters, data exchange & consequently the reporting.
Let me explain how one company achieved all of this. Their payables transformation initiative centered around two key aspects–
- Setting up of a centralized mail room where invoices were received, scanned & Indexed
- Customization of the ERP to ensure:
- All scanned invoices are tagged to the relevant purchase order / accounting entry
- All issues with invoices are flagged & raised with the relevant department / vendor &
- Periodic reporting (TAT) on invoices received, lying in resolution, processed & pending
The process is summarized as follows:
- Invoices received at the centralized mailroom are keyed into a customized screen in the ERP; generating a unique identification number.
- These invoices are then scanned and tagged in the ERP using the unique number generated in 1) above.
- The payables team verifies the invoices in the system with the PO, GRN / SRN and posts the same.
- Where no POs are created / required, an online workflow sends the invoice to the concerned approver to view and approve online.
- Any issue / query is updated in the ERP and this triggers off an auto email to the relevant user / vendor email ID.
- On satisfactory resolution of all queries, the payables team ensures payment on the due date.
- Fortnightly / monthly reporting generated through the ERP on no. of invoices received, queries pending resolution, processed not paid / paid, etc.
- Online dashboard available to internal stakeholders & vendors to view status of their invoices & payment TAT.
Benefits: Easy & Online retrieval of invoices for audits & reference, integrated interface between the front end invoice receipt & back end invoice processing, full transparency on invoice status at all stages of the payment cycle across all vendors, a proactive rather than reactive approach to payables outliers, timely reporting of TAT & other reports to all stakeholders. And last but not the least, quick response to all payable escalations made to the CXOs.
A little word of caution though, the system set up requires significant investment of time & effort by the finance team in particular to ensure the right processes are built in; but needless to add, the result is truly transformational!
-By Hyacinth Ferrao, Financial Controller & Senior Vice President, Star India
About the author:
Apart from overseeing the controllership function at STAR India, Hyacinth has been actively involved in projects involving systems implementation, outsourcing and mergers. He has also been associated in the past with the Timesgroup and PwC in various roles.
PS: Views stated in the Blog are the author’s personal views.