Posted by Steve Wilcox on Fri, Apr 24, 2009 @ 10:47 AM
Recently, Karen Kroll penned a very good article for BusinessFinance titled "How AP Got its Groove Back."
The gist of the article is that "with external funding tight and sales flat or declining at most firms, more corporate executives are looking internally to identify ways in which they can squeeze cash from operations -- or at least get a better handle on its flow. When you can't look to sales to replenish the corporate coffers, you need to be better stewards of the cash you've already brought in, says Thomas Bohn, executive director and chief executive officer with the International Accounts Payable Professionals (IAPP), an Orlando-based industry association."
Most of the article presents a very interesting case study for setting up a new AP Shared Services operation at Broadridge, a $1.6 billion solutions provider based in New York.
There are lots of great tidbits including the following:
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"At this point, leading firms are automating about 80 percent of their invoices, says Kurt Albertson, director of advisory services with The Hackett Group in Atlanta. This compares with about 20 percent for other firms."
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"an in-house finance and accounting shared services center can cut AP costs by 40-plus percent, but only if tools like imaging and workflow solutions are introduced ..."
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"As Broadridge's experience shows, technology is key to transforming and improving the accounts payable process ... While all potential technology investments are scrutinized these days, the benefits of systems that can streamline the AP process increasingly are recognized by the folks holding the purse strings. "Processing paper-based invoices is very inefficient," Jones says. "Enterprises can't afford that level of inefficiency today."
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"Moreover, most executives urgently need to enhance visibility into cash flow, and technology can provide that ... executives today are eyeing projects that let them know when cash is coming and going. "
There are a lot of other interesting points in the article including a list of AP Best Practices at the end that includes a quote from yours truly:
1. Keep it simple. Avoid processes "with multiple loopbacks, and re-thises and re-that's," as these add time, says Rakesh Shukla, co-founder of 170 Systems. Along these lines, you want a single technology platform, chart of accounts, vendor master file, and so on, he adds.
2. Eliminate paper. Processing, storing, and finding paper consumes time, space, and money, notes Evie Fletcher, accounts payable manager with RDO Equipment Co. in Fargo, North Dakota. Use electronic data transmissions and imaging and workflow solutions to cut paper use.
3. Use key performance indicators. Executives who want to improve the job their AP department is doing need to focus on key performance indicators (KPIs), says Duncan Jones, a London-based senior analyst with Forrester Research. Examples include the average time it takes to process an invoice and the number of invoices each AP employee handles.
4. Bring stakeholders together. Truly improving AP requires bringing together representatives from procurement, treasury, and the supply chain, as well as accounts payable, says Kurt Albertson, director with The Hackett Group. "You have to get the four groups working together."
-Rakesh Shukla
@rakesh170
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Posted by Rakesh Shukla on Mon, Oct 13, 2008 @ 06:50 PM
"
Laws are like sausages, it is better not to see them being made."
Otto von Bismarck
How true ... especially after watching the passage of the Wall St. Bailout bill. The bill had some very weird provisions. Here is my favorite:
SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.
(a) IN GENERAL.-Paragraph (2) of section 4161(b) is amended by redesignating subparagraph (B) as sub301 paragraph (C) and by inserting after subparagraph (A) the following new subparagraph:
‘‘(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS.-Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly-
‘‘(i) measures 5⁄16 of an inch or less in diameter, and
‘‘(ii) is not suitable for use with a bow described in paragraph (1)(A).''.
(b) EFFECTIVE DATE.-The amendments made by this section shall apply to shafts first sold after the date of enactment of this Act.
What wooden arrows for children have to do with solving our current credit crisis is beyond me. As I read the full text of the bill (yes, I actually read most of it), I was kinda shocked at the inclusion of some other unrelated tax breaks (i.e. pork) benefitting Hollywood producers, stock-car racetrack owners and Virgin Islands rum-makers.
I guess this is how a bill is passed ... a big pot of pork sausage is Washington's recipe for final passage.
When it comes to bills, Washington is not the only place for dysfunctional processes. The other common place is Account Payable departments. Here is a not-so-uncommon picture of the way a bill was paid at one of our customers before the process was automated:
Even though this customer had implemented an ERP Accounts Payable system, the Accounts Payable processes had not been upgraded. Here's where workflow and imaging enters the picture -- it allows you to tap into the full power of these expensive ERP investments by automating, sometimes redesigning and always streamlining the business processes which touch these powerful ERP systems.
In many cases, you can take dysfunctional business processes which used to take, for example, 10, 15, 20 or even more steps and reduce it to less than 5.
Now, the root cause of these dysfunctional processes is NOT that the ERP system is flawed but that critical pieces of information are often NOT online in a tightly integrated fashion, which causes the communication and collaboration channels to be highly inefficient - here we're talking about the back and forth e-mails, faxes, copies, interoffice mails, Fed Ex's, etc.
These inefficient business processes can be dramatically improved to truly leverage your existing ERP systems if you capture all your information online, tightly integrate it, and then provide a highly intuitive and intelligent way to interact with that online information.
Paying bills should not be like passing laws ... or making sausages.
-Rakesh
Posted by Rakesh Shukla on Fri, Sep 12, 2008 @ 01:37 PM
221 Days, 16 Hours, 23 minutes ... that's how long it has been since the Patriots lost the Super Bowl and I am still crying over that loss. Did they really lose the championship game after going 18-0?
I am still in denial.
Unfortunately, denial is only stage 1 of the "5 Stages of Grief." The "5 Stages of Grief" is process by which people deal with tragedy and grief and was introduced by Elisabeth Kubler-Ross in her 1969 book "On Death and Dying."
The stages are:
- Denial: "It can't be happening."
- Anger: "Why me? It's not fair."
- Bargaining: "Just let me live to see my children graduate."
- Depression: "I'm so sad, why bother with anything?"
- Acceptance: "It's going to be OK."
These stages can be applied to any form of catastrophic personal loss ... a loved one, job, freedom, a Super Bowl loss ... Tom Brady getting injured for the season ... and even Accounts Payable!
With some help by some great illustrations by Steve Greenberg (http://www.greenberg-art.com/), here is a tongue-in-cheek look at "The 5 Stages of AP Grief":
The 5 Stages of AP Grief
Stage 1: Denial
"There is just no way that there could be anything wrong with the way we process invoices around here. Whatever frustrations business managers, suppliers, auditors and my AP staff say they are experiencing must be bizarre delusions caused by impaired reasoning."
Stage 2: Anger
"I am SOOOO furious! WHO'S TO BLAME? I'm not gonna stand for this!
Why can't those lazy business managers send their invoice approvals in on time!
Why can't those incompetent suppliers send invoices that actually match the POs we send them!
Those @#%*! auditors found another control deficiency! Those pointy-headed, bean-counting suits are just too picky!
Those procurement boneheads are no help in resolving holds"
Why can't my AP work more efficiently with less errors?!"
Stage 3: Bargaining
"If we can just survive this quarterly close, I promise to do away with the manual, paper-intensive processes that are causing such long work hours. If this all goes away, I will simplify and automate our processes ... I PROMISE."
Stage 4: Depression
"This job is so hard and nobody appreciates all the hoops we have to jump through to get a stinkin' bill paid."
Stage 5: Acceptance
"It wasn't supposed to be this way... but I guess this is life. It is what it is. And, hey, if paying a bill was as easy as it sounds, I wouldn't have a job."
Again, thanks to Steve Greenberg for the great illustrations!
Illustrations by Steve Greenberg, Ventura County Star, Calif.
Posted here with artist's permission.
http://www.greenberg-art.com/
-Rakesh Shukla
Posted by Rakesh Shukla on Mon, Jul 07, 2008 @ 11:10 AM
This summer, I volunteered to be a camp counselor/coach at a basketball overnight camp for inner city kids.
After 5 days and 4 nights with wakeup calls at 7:00am and "lights out" at 11pm, I was completely and utterly exhausted. My "team" consisted of 10 fifth and sixth graders -- each one was a good kid but a few had very little respect for authority, most had very short attention spans and all of them had extraordinary excuse-making abilities.
(In hindsight) there were several amusing incidents. One of my kids (let's call him D) was a chronic liar. One morning during our dribbling drills, for no apparent reason, D smacked a teammate on the head. Almost everyone saw him do it.
"Why the heck did you hit Mark?" I asked as Mark was rubbing his head and crying.
D threw up his arms in disbelief. "What?!? Why do I get blamed for everything! Coach, I didn't do anything. I swear."
No number of pushups could extract even a half-hearted apology from D. Instead, D concocted one of the best excuses I have ever heard - "Coach, I could tell that Mark was thinking of hitting me first so I HAD to defend myself." Now, even with my patience running very thin, I had to admire the creativity of that excuse.
I had another kid (let's call him O) who came to this 5 day overnight camp with ONE pair of shorts and ONE pair of underwear.
O's "dirty laundry" solution?
Steal other campers' shorts and skivvies, of course! It was hard not to chuckle dealing with the "daily undie theft" but the sad part was that Oliver really didn't understand that "borrowing without permission" was wrong.
This is how my week went - it was truly an exercise in patience as the kids always had some excuse for their (mis)behavior. Yes, we actually played some basketball, learned some things and had some fun -- but managing and supervising these kids was an all-consuming task from the moment I woke up to the moment I put my head down on my pillow. A co-worker here at 170 Systems joked that my experience with these kids sounded similar to babysitting invoice approvals from business managers in the field. It's actually a pretty good analogy. How much time do AP Professionals waste chasing down approvals? How many paper invoices have really been "lost?" How many lame excuses can field approvers fabricate for procrastinating on approvals?
We all know that accurate approvals and authorizations are a critical internal control. A robust approval process should ensure that accurate approvals are obtained in a timely manner with accountable audit trails that are tracked in real-time. From a bottom-line perspective, late approvals also cost money in missed discounts, late fees and productivity-sapping "where's my payment" inquiries.
To minimize the amount of time you have to spend babysitting approvals, you HAVE to do approvals online. If you are still signing things on pieces of paper, making copies, mailing stuff, matching with signature books, etc. ... then a significant part of each AP Staffer's day will be wasted babysitting approvals and enduring excuses. To free yourself from approval "daycare," the approval process must be systematic, on-line and have full security controls.
Let me ask you this: How many times have invoices been paid late because of tardy approvals and then AP gets the blame! Automating AP through technologies such as workflow and imaging can encourage timely approvals with automated routing based on configurable business rules for appropriate spending levels, e-mail reminders and escalations. With escalations, if you receive an invoice and ignore it, you will get a reminder. If you ignore that reminder you may get a second reminder. Finally, if you procrastinate too long on the approval, the approval will automatically be escalated to your boss. It usually takes one invoice to be escalated once and then all of a sudden you have timely approvals. It's amazing to witness this change in behavior when approvers realize the process is systematic, controlled and tracked such that there are ramifications if approvals are not carried out in a timely fashion. With this type of visibility into the approval process, not even D could come up with an excuse!
So, if you have approvers named D and O who always have a "dog ate my invoice" excuse for late approvals and don't understand that overdue approvals are wrong and cost the company money, consider the benefits of automating the approval process.
-Rakesh
P.S. So what are the best excuses you have heard from delinquent approvers? Please let us know by posting a comment.
Posted by Steve Wilcox on Fri, Jun 20, 2008 @ 10:42 AM
" At the beginning of the season, I told the team it was all about defense. If we play great defense we're going to win the world championship."
- Doc Rivers
As a youth basketball coach, the most frustrating skill to teach kids is how to play defense. Actually, that's not quite correct - the most frustrating skill to teach is wanting to play defense. Afterall, defense is not as "fun" as offense and playing good defense makes you tired. This was exactly my son's attitude ... until this season. Now he loves playing defense.
What changed?
Kevin Garnett came to the Celtics. Tom Thibodeau was hired as the Defensive Assistant Coach. The whole team bought into playing hard defense. Who knew Paul Pierce could play such great defense??? The Celtics transformed into a defensive machine.
"I want to play defense like KG!" I overheard my son telling a teammate at practice the other night . Ahhh, sweet music to my basketball junkie ears -- talk about making a youth basketball coach's job easy! I tried to preach defense till I was blue in the face. The kids just didn't care ... until this magical Celtics season where defense has been THE focal point.
With the crowd deliriously chanting, "DEE-FENSE, DEE-FENSE, DEE-FENSE!," The Celtics won their 17th NBA championship last night. With their maniacal, suffocating team defense, the poor Lakers didn't stand a chance.
In the business world, great defense is about managing risk with strong internal controls. My high school basketball coach always used to say that great offense starts with great defense. Similarly, strong internal controls (i.e. defense) optimizes business performance (i.e. offense). Here's another way to think about it -- controls are like car brakes. Cars have brakes so that they can go faster. If a sports car didn't have brakes, how fast could it really go? Strong internal controls, like brakes, allows a business to put the foot on the accelerator and compete aggressively.
The issue, of course, is that compliance costs, on average, have added $200K per billion in revenue to the cost of finance since SOX ... unless you are a world class company in which case, finance costs continue to go down as a percentage of revenue (Hackett Book of Numbers Insight, Dec. 2007)
So what are these world class companies doing to strengthen controls while keeping a lid on control costs? 4 things, they are:
- Centralizing and simplifying processes: Shared services is the best way to centralize processes and reduce costs.
- Leveraging technology: Leading companies leverage technology to have fewer ERP systems and minimal duplication of data. For example, having a single vendor master file and a single chart of accounts (which is easy if you have a single ERP system) allows you to have a single source of the truth which is critical for financial data.
- Automating controls: Average companies also perform a LOT more manual control activities than leading companies which means they are operating with an unnecessary level of risk.
- Using more preventative controls: Leading companies have more preventative controls. Of course an environment where deficiencies are prevented in the first place is more desirable and much less expensive than having to detect problems after the fact.
All of these points are especially true in Accounts Payable. World-class AP organizations have strong internal controls that don't increase operating costs and don't sacrifice service levels. If you believe the experts, this is only possible through automated, preventative controls that leverage technology -- automated routing of approvals, real-time enforcement of segregated duties at the transaction level, comprehensive audit trails that track ALL invoice touches, etc.
Just like great defense wins championships, strong internal controls enable world-class performance.
The final score last night was:
131-92.
No, that's not a typo. That score truly exemplifies that great DEE-FENSE leads to great offense.
-Rakesh
P.S. If you want to see an example of probably the worst defense in the history of professional basketball, check out this clip from Game 4 of the NBA finals. Heck, most 11 year olds play better defense than Laker guard Sasha Vujacic does here!
Posted by Steve Wilcox on Wed, Jun 11, 2008 @ 10:19 AM
Recently, I attended a Celtics game with my family after a loooong time. I hadn't been to a Celtics game since my college days in the mid 80s during Larry Bird's heydays. What a difference a few decades make! I was really struck by how much things have changed.
Back then, an imminent Celtics victory was heralded by huge plumes of cigar smoke. The man doing the pillowed puffing was, of course, the late Red Auerbach. Today, as the Celtics start to wrap up a game, the new virtual victory cigar is a Jumbotron vintage video from American Bandstand which features a bearded dancer dude wearing a tight "Gino" t-shirt and bell-bottoms with a very big flare. Watching him "shake, shake, shake his booty" is an absolute hoot as you can see in this YouTube Video:
The total entertainment product has also changed ... quite dramatically. In the "old days," it was only about basketball without any other distractions. For example, back when Russell, Havliceck and Bird were winning championships, there were absolutely no mascots or cheerleaders. Mascots and cheerleaders at a Celtics game? Unthinkable!
My, how things have changed!
Today, LUCKY the leprechaun is the Celtics mischievous mascot and, I must admit, he is quite entertaining -- my kids especially love him.
As for cheerleaders, the Celtics were one of the last teams to have dancers and they are all knockouts (but none of them are as attractive as my dear wife, in case she reads this). And, yes, they can really dance (but not one is as mesmerizing as my dear wife, in case she reads this).
Now that I have secured my spousal spot in the dog house let me get to my point about Accounts Payable departments. If the stodgy Celtics of old can adapt and change, why can't AP? Going to a Celtics game is a totally different experience from the old Boston Garden days but unlike the Celtics, many AP departments have NOT changed one iota since the last Celtics championship 22 years ago in 1986.
In 1986, most AP departments were entirely paper-based.
In 2008, recent reports by The Hackett Group and Aberdeen show that most AP departments are still entirely paper-based...only one third of all enterprises have a significant level of automation in place! We see this all the time when talking to prospects. One of my colleagues, Larry Concannon, recently gave a presentation at the RECAP AP show. When he asked the audience what they were currently doing to process invoices, most just looked embarrassed. Why? More than a few sheepishly admitted they were still mired in manual, paper processes and doing things more or less the same way as 20 years ago.
I know I am biased but plenty of benchmark and survey data shows that high levels of automation can produce significant benefits including reduced costs, strengthened controls and improved service levels.
Just like the entertainment experience of a Celtics game has changed over the past 20 years, the "AP experience" can be dramatically changed for the better through modern automation building blocks such as e-Invoicing, Imaging & OCR, Workflow, Supplier Portals, etc. Something for you to consider as Kevin Garnett, Paul Pierce, Ray Allen, LUCKY, the dancers, and Gino "Disco Fever" lead the Celtics to (hopefully) their 17th championship this year.
-Rakesh
Posted by Rakesh Shukla on Wed, Apr 16, 2008 @ 11:36 AM
What, talk of peace? I hate the word,
As I hate hell, all Montagues, and thee
Tybalt (to Romeo)
Romeo & Juliet, I, i
Watching a Grade 5 production of Romeo and Juliet is endearing to the say the least. As far as I can tell, my son's classmates still have very little interest in the opposite sex. Unlike the girls who all want the role of Juliet, the love scenes make all the boys cringe.
"Poor Luke," laments my son about his best friend, "he has to play Romeo and act out ... (he is having trouble finishing the sentence) ... act out .. (he finally blurts out the "L" word) ... love. Blech! It's sooo embarrassing."
It is almost cruel to make 10 and 11 year old boys perform this Shakespeare classic. On the other hand, the feuding scenes between the Montagues and Capulets, are right up the boys' alley!
You are a saucy boy!
Capulet (to Tybalt)
Romeo & Juliet, I, v
My son played Tybalt Capulet, Juliet's hot-headed cousin who is always looking to fight a cursed Montague - especially that Romeo rogue! He thrived in this saucy-boy role of shoving, fighting, blood and death duels.
The ancient grudge of the Montagues vs. the Capulets reminds me of another ancient grudge: Accounts Payable vs. Procurement.
When invoices don't get paid on time, procurement points the finger at AP. AP, in turn, points the finger at procurement blaming them for taking too long to resolve price holds in the first place!
When suppliers complain about payment errors, procurement gets infuriated at AP for jeopardizing supplier relationships that have been formed over many years and negotiations. AP, in turn, is enraged that the supplier Invoice, the PO generated by Purchasing and the contract terms Purchasing negotiated are not even close to being in sync. How is AP supposed to make a "correct" payment when the PO, Invoice and Contract Terms are all different!
Romeo, the love I bear for thee can afford no better term than this... thou art a villain.
Tybalt
Romeo & Juliet
I have seen very few organizations where AP loves Purchasing or Purchasing loves AP. More typically, they despise each other.
So what is the solution? Some argue that since Purchasing is more "strategic," AP should report to Purchasing. The Hackett Group, in fact, considers an end-to-end purchase-to-pay (P2P) function under common management as an accepted best practice.
Although management and reporting structures may solve some of the feuding issues, I think enabling real-time visibility into the AP process stops the unproductive finger-pointing in its tracks. For example, if you have an AP imaging and workflow automation solution that can audit who, when, how and where for each invoice at each step of the process and then report on those metrics, it increases accountability rather dramatically ... and thus virtually eliminates the bickering and unproductive fighting.
BENVOLIO: What, art thou hurt?
MERCUTIO: Ay, ay, a scratch, a scratch; marry, 'tis enough.
ROMEO: Courage, man; the hurt cannot be much.
MERCUTIO: No, 'tis not so deep as a well, nor so wide as a church-door; but 'tis enough, 'twill serve: ask for me to-morrow, and you shall find me a grave man.
MERCUTIO: A plague o' both your houses,
They have made worms' meat of me.
Romeo & Juliet, III, i
-Rakesh