Procure-to-Pay Supplier Payment Process Improvements

Wednesday, March 1, 2006

As discussed at the February Senior Business Administrators meeting, Purchasing Services and the Office of the Comptroller have begun an initiative to enhance the Procure-to-Pay (P2P) supplier payment process. We will employ an approach using measurements to identify exceptions in the P2P process which prevent us from paying our suppliers within the established business terms. The key measurement we will use to monitor our progress towards improving the process will be "The Percentage of Purchase Order Invoices Paid Within Supplier Terms".

The business purpose for improving the University's supplier payment performance is to:

• Reduce the administrative time spent on transaction processing for Schools/Centers, Purchasing and Accounts Payable
• Provide leverage for negotiating "best pricing" with suppliers and potential early pay discounts
• Increase time for "value added" services in Purchasing, Accounts Payable and Schools/Centers

Beginning March 1, 2006

In order to achieve the goals stated above, the Accounts Payable Office will develop the following baseline measurements for exceptions in the P2P process. The exceptions will be summarized by Buyer/PO Manager and Organization as follows:

1. Invoice Matching Holds on hold for more than 30 days
2. PO Invoices not entered into BEN Financials within 30 days of the supplier invoice date
3. PO's created after the supplier invoice date

Action Required by Schools/Centers

The following reports have been developed to assist you with identifying process exceptions within your organization, by Buyer/PO Manager. Your involvement will be required to work with the Buyers in your organization to eliminate the exceptions.

The reports outlined below are available to the PO Manager and PO/CO Manager responsibilities in BEN.

1. For Invoice Matching Holds on hold greater than 30 days:
   • The initial goal is to eliminate this exception by June 1, 2006, by working with your Buyers/PO Managers. The Accounts Payable Office will be available to guide you as necessary, with instruction on resolving holds.
   • Identify Buyers within your School/Center with these exceptions using the following reports designed to provide invoice and hold details by Buyer:
     1. The 501. Matching Holds Report has been modified to show "Days on Hold". This report can be run by BUYER, ORG or FUND.
     2. The 500. Matching Holds Extract has been modified to show "Days on Hold". This extract creates a SPACE delimited file which can be brought into an excel spreadsheet. It can be run by CNAC and/or ORG and FUND.
   • As an ongoing goal we will work to reduce the cycle time for releasing invoices on hold to 7 days or less.
2. For PO invoices not entered into BEN Financials within 30 days of the supplier invoice date:
   • The initial goal is that by June 2006, monthly exceptions by Buyer and Org will be reduced by 50% over FY05 average monthly exceptions. For FY 05 the average monthly PO invoices not entered into BEN Financials within 30 days of the supplier invoice date were 3,100 or 24 % of the average monthly PO invoices processed.
   • The ongoing goal is to eliminate this exception entirely.
   • The Accounts Payable Office will identify Buyers within your School/Center with a large number of these exceptions and be in contact with you or your designated coordinator to develop corrective action plans.
   • Use the NEW 015 - Invoice Creation Exceeds Vendor Invoice Date Detail Report, to identify exceptions by Buyer for your Org(s). The report is designed to run using a date range and provides historical activity for this process exception.
3. For PO's created after the supplier invoice date:
   • The initial goal is that by June 2006, monthly exceptions by Buyer and Org will be reduced by 50% over FY05 average monthly exceptions. For FY 05 the average monthly PO's created after the supplier invoice date were 2,300 or 18 % of the average monthly PO invoices processed.
   • The ongoing goal is to eliminate this exception.
   • The Accounts Payable Office will identify Buyers within your School/Center with a large number of these exceptions and be in contact with you or your designated coordinator to develop corrective action plans.
   • Use the NEW 016 - PO Created After Supplier Invoice Date Detail Report, to identify exceptions by Buyer for your Org(s). The report is designed to run using a date range and provides historical activity.

In addition to the exceptions noted above, we are working to develop the measurements for invoices processed during a month that go on matching holds and invoices that are rejected back to suppliers. The intent is to determine the root cause for our matching holds and invoice rejects and to apply corrective actions as necessary to minimize these exceptions. When the measurements and reporting are in place for matching hold activity and invoice rejects, we will notify you and provide further detail on how they will be included in the monitoring process and corrective action plans.

Action Required by Accounts Payable

The Accounts Payable Office will be in contact with you to discuss plans for executing these process improvement initiatives within your school or center. We will work with you and the Buyers/PO Managers in your organization to develop corrective action plans.

On a monthly basis going forward, the Accounts Payable Office will monitor these exceptions and will communicate progress for your school or center.

The Accounts Payable Office will provide summary level reports to the executive team. These reports will focus on the percentage of PO invoices paid within terms, on a fiscal year-to-date basis. The P2P process exceptions will also be reported monthly for total number of invoice exceptions by type and as a percentage of total invoices processed.

Report Information

The measurement reports for P2P exceptions will be available to anyone with the BEN PO Manager role. More information on these reports can be found on the BEN Financials web site.

Please direct all questions related to this imitative to Tom Slavinski, Associate Comptroller.