Case-Study 2
General Background :
Pharma Manufacturing sites were moved from JDE to SAP platform in Q3 ’07. Since the introduction to SAP 4.7 the POT% dropped from 80%+ to 52%. This lead to high level of rework and frustration at sites. Vendors started putting Pharma on ‘STOP’ and threatening court action to recover non-payment of invoices
- Annual volume of invoices > 50,000, transaction value of £350 Million
- Current POT @ 52%, down to < 40% for some sites
- Client target – Onsite joint project to ↑ Merps POT by 22% to 74%
- High Supplier TAT to send invoices to AP
- Invoices lost in transit or within system
- Invoices lost in transit or within system
- High approval TAT
- High Processing TAT
- Lack of controls for failed invoices/ invoices which stop at any time during its life cycle
- Payment Terms too low, not aligned to system capability
- $0.65 MN Risk avoidance due to late payment charges and interest charges
- 5 FTE productivity benefit at Genpact
- POT ↑ from 52% to 80%
- 60% reduction in process DPMO
Key Problems Identified
- Incorrect scanning logic, transmission failures and broekn rescanning process
- Incomplete information on invoices
- Suppliers delay submission of invoices (part of their normal process)
- Service Entry related payments process broken
- Sites book-in goods after invoice is sent by AP
- Requisition and PO elements incorrectly updated at sites
- Approver name back-end system tables inefficient
Key Improvements
- Correction of invoice sorting logic, IT code corrections for loss of invoices in system; VRS software implementation (for clear images); Controls introduced to identify and quickly resolve invoices failed in system
- New service entry invoice process
- Approval Training to staff at GPC sites/ Genpact
- Additional queue for urgent invoices
- Performance metrics linked to individual errors at Genpact
- Calls with Top late suppliers to improve Receipt TAT
Typical AP Process Issues and Solutions : Resonates ?
Mailroom & Vendor Master Setup
- No Structured Mailroom.
- Vendor master clean up to fix the downstream.
- Inward Vs Receiving Vs invoices process is not in place.
- Backdated GRN at Sites causing reporting and Tax compliance issues.
- Incorrect GRN or no reconciliation process results in to delayed Returns filing to the regulatory.
Invoice Processing
- Incorrect PO creation. Partial receiving’s cannot be entered against 1 qty.
- No defined process for Retention hold resulting into revenue leakage.
- No defined process for Retention hold resulting into revenue leakage.
- Supply Chain team at respective sites are responsible for MIGO of the PO.
- Delayed MIRO due to incomplete documentation or surge payment request resulting in to many accounting issues.
- Inappropriate understanding of Bill to , Ship to and usage of TIN number at the time of invoice booking.
TAX Nuances
- TAX calculation on invoices may not be authenticated. PO will only have product value and no contract or validation for TAX charged.
- Document Management System and archival system is not at all utilized.
- Delayed document archival for Hardcopy invoices & C-Forms at Head office.
- Backdated Accounting Periods remain open hence controls and compliance missing.
Reporting & Knowledge Enhancements
- No robust reporting system.
- Depreciation not validated or reviewed from past 3 years.
- Trial balance not getting reviewed .
- Effective utilization of SAP from accounting / controls perspective is missing
Unstructured mailroom / No Mailroom
→
Redesign mailroom , build checklist for Mailroom
Poor Quality of Scanning
→
Up skill mailroom resource on Scanning nuances
Low invoice processing tool productivity
→
Use of screen scraping tool, ERP Integration with Workflow
Low Accuracy
→
Maker & Checker (100%) , Quality Audit and Reporting
GRN Vs Invoice Control Missing
→
Enforced the basic reconciliation processes at mailroom
No reporting tool
→
Daily Dashboard
Sample Roadmap Accounts Payable- May be the right way :
Methodology to address Process Challenges- How
- Value stream mapping
- Identification of Kaizens
- Root cause analyis
- Process door
- RPA door
- Learn , Unlearn & Upskill
- Business & Accounting acumen
- Training
Typical Vendor Management Process-Example
