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ERROR PREVENTION
Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Copyright © 2012 Technology Insight Corporation.All rights reserved.
This document and translations of it may be copied and furnished to oth-ers, and derivative works that comment on or otherwise explain it or assistin its implementation may be prepared, copied, published, and distributed,in whole or in part, without restriction of any kind, provided that the abovecopyright notice and this section are included on all such copies and deriv-
ative works. However, this document itself may not be modified in any way,including by removing the copyright notice or references to Technology
Insight Corporation , without the permission of the copyright owners
Mount Royal Avenue, Suite 400Marlborough, MA 01752
www.technology-insight.com
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ERROR PREVENTION
Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
n every accounts payable department, even those
within stringently run organizations, the persistent
problem of inaccuracy lurks. This issue results directly in lost
profits to the company and mitigation of this risk is a top
issue for A/P managers and CFOs. In an ever-changing
business landscape companies and their
employees have learned to exist in a constant
state of flux. While they have readily
adapted to this state, constant change itself
has the greatest impact on losses within
accounts payable. Those who
remain focused on this risk and manage
it consistently are best poised for
long-term success in this area.
OVERVIEW
LOSS REDUCTIONIS AN ON-GOING
ENDEAVOR REQUIRINGTHE RIGHT TOOLSAND A LASTINGCOMMITMENT.
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Best practices do exist to reduce this risk and they
vary from technology-based to management-based
solutions. It is estimated that 60%-70% of accounts
payable errors can be traced to just a few core
sources, though each company must drill down on
the root causes unique to their own organization.
As a result of a dedicated loss reduction
endeavor, a company can expect to
recapture a significant portion of those lost
profits. Even when inaccuracies equal less
than 0.5% of total payables, a deceptively
negligible figure, in many companies this
translates to a potential regeneration of
millions of dollars in cash flow. At the end
of the day, no one wants to leave that
kind of money on the table.
60%-70% OFACCOUNTS PAYABLEERRORS CAN BETRACED TO JUST AFEW CORE SOURCES
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
THAT RESULT IN ACCOUNTS PAYABLE ERRORS
TOP 6 ISSUES
Invoice Data Entry Errors and Inconsistencies
Unclean Vendor Master Files
Purchase Order Mismanagement and Over-Reliance
Temporary Personnel and Employee Turnover
Incomplete or Flawed Implementation of New Systems
Mergers and Acquisition Transitional Failures
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
This remains the biggest reason for lost profits in
accounts payable. Inconsistencies in how each invoice is
entered run the gamut. The invoice number, the date
and FX issues are the most obvious but a slew of things
related to data entry standards can sneak in. Each
results in the same potential of duplicate payments.
Even something as ordinary as the increasing use of p-
cards within companies creates more duplicate
payments. Vendors continue to send statements (which
mimic invoices) for purchases made with a p-card and
these are erroneously entered as a new invoice. Despite
invoice entry usually being a primary training issue for
new hires, it remains the most likely source of
inaccuracy - simply because there are an infinite
number of ways to get it wrong.
THERE AREAN INFINITENUMBER OFWAYS TO GETIT WRONG
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Many duplicate payments can be traced back to a
single source, the Vendor Master file. A lack of data
entry standards for Vendor Master files results in not only
duplicate vendor names, but even a completely duplicate
vendor, including addresses and contact information. The
simple drop of a hyphen or an ampersand changes
everything. Even when an organization has exceptional
data entry standards concerning invoices, they may have
weak Vendor Master file standards which result in the same
consequence of duplicate payments. Complicating matters
further, acquisitions create an even greater chance that
Vendor Master files will be duplicated. A push to merge the
new company with the existing company as quickly as
possible usually means that Vendor Master files will not be
thoroughly inspected for duplicates. Additionally, on the
vendor side, duplications easily occur when distributors are
involved or the vendor is party to their own merger.
MANY DUPLICATEPAYMENTS CANBE TRACED BACKTO A SINGLESOURCE
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Many organizations are under the misguided
assumption that the implementation of PO
requirements creates an automatic control within the
purchasing department, thus eventually reducing
erroneous payments down the line. In actuality, more
than 50% of duplicate payments have a PO attached to
them. The greatest culprit is the blanket purchase
order, a phenomenon that is increasing in usage as a
reaction to accountability measures like Sarbanes
Oxley. Blanket purchase orders dilute the validity of
POs as reliable source documents in the accounts
payable department, rendering them virtually
useless as a loss prevention measure.
MORE THAN50% OFDUPLICATEPAYMENTS HAVEA PO ATTACHED
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
On average, upwards of 60% of A/P departments
experience an on-going turnover in staff. Whether this
is the result of transitions in permanent employees or
cyclic demands that require temp staffing, new faces
inevitably lead to an increase in errors. Data entry
skills from other companies, or multiple companies
with temp staffing, rarely match the current company's
standard. Despite the common premise that data
entry skills are easily transferable from company to
company, too many nuances exist. Lowering
turnover and developing efficient new hire training
procedures is crucial for many companies.
A/PDEPARTMENTSEXPERIENCE ANON-GOINGTURNOVER INSTAFF
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Beginning in the late nineties, an influx of ERP systems
changed the face of many accounts payable departments.
This ushered in an era of software dependence, changing
the way business was managed going forward.
While the systems and software are now integral to
everyday operations, too many were rushed into
implementation, leaving holes in their usefulness and
weakening the positive impact they could have on loss
prevention. This is compounded in mergers, where
multiple ERP systems might be in use and the potential
for duplicate payments and errors skyrockets.
Straightforward decisions to not integrate ERP systems or
the invoice history of a new acquisition are the key
reasons that duplicate payments and errors occur.
Additionally, companies have eagerly ventured out to
SOMETECHNOLOGIESLACK RELIABLESAFEGUARDS TOCAPTUREDUPLICATIONS
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
other technologies that streamline data entry,
including imaging (with or without OCR) and various
types of EDI feeds. Again, while these concepts are
great in theory, the practical implementation and
then, more importantly, the on-going assessments of
their true accuracy are usually neglected. Many
organizations see a spike in duplicate payments after
installing these kinds of technologies, whether from
misinterpretation of text in OCR, duplicated EDI
feeds or even simpler spreadsheet uploads
that happen more than once. What these
technologies lack are reliable safeguards
to capture duplications.
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
In our current marketplace, despite the economic
downturn, this continues to be a big topic. Usually, the
greatest culprit is basic confusion, on part of the staff,
the customers and the vendors. In the worst scenarios,
when the two companies have common vendors, they
react in fear to the transition, wondering how they will
get paid. Their solution is to send the invoice to both
companies in the transition. Obviously, a surge in
duplicate payments is inevitable in the short term and
in the long term, open credits and statements begin to
trickle in, creating a rat's nest that eventually needs
unraveling. In some mergers, the decision is made to
utilize a shared service or outsourced model, in hopes
of quelling some transitional upheaval. What many
THE GREATESTCULPRIT ISBASICCONFUSION
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
companies are surprised to find is that these models
actually have more errors than a traditional in-house yet
decentralized environment. The outsource model is flawed
essentially by disconnecting employees from a process
they are attuned to and in which they can easily spot
errors. In an outsourced model, implementation and
startup cost are much lower, because the focus is on
creating a lean, repetitive task-oriented environment. What
is lost is the connection of an employee who knows where
to look for potential problems. Over time,
outsourced models can adapt, resulting in
lower errors but in the interim, problems may surge.
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ERROR PREVENTION
Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
While minimizing these risks can seem like an
insurmountable task, there are actually a number of
interesting and practical ways to avoid losses in accounts
payable. Below are just a few of the tactics that can help.
Invoice Standards:
It all begins and ends with invoices.
Most important is the receiving of invoices.
With the simple implementation of a single
location for invoices to go each and every
time, the handling of that invoice
becomes timelier and then payment
follows suit. Consistent communication
with staff is imperative here,
to create a system that everyone
is aware of and understands.
BEST PRACTICES
THERE AREACTUALLY
A NUMBER OFINTERESTING AND
PRACTICAL WAYS TOAVOID LOSSES
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ERROR PREVENTION
Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Inactivating Old Vendors:
Avoiding duplicate Vendor Master files is essential, but one issue
that crops up beyond that is a litany of Vendors that should be
inactivated. Declare a time limit, perhaps 36 months, and inactivate
any vendors that have not been used in that time frame. Depending
on the business, this time frame may serve to be further reduced,
even down to just 18 months. The time frame should align with each
company's business processes.
Hard Stop Implementation:
Hard stops can be a very effective tool to eliminate basic
duplications. Instead of a soft stop system, which only alerts the user
that duplicate data exists (duplicate invoice number, date, amount,
vendor), a hard stop completely blocks the entry of said invoice.
Pre-ERP Duplicate Payment Checks:
These can vary extensively, but the underlying concept is the same,
to stop duplicate payments before they hit the ERP system. They are
powerful tools that check for duplications in EDI feeds, spreadsheet
uploads, p-card payments or any other pre-workflow process.
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ERROR PREVENTION
Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
PO Management:
Although PO management occurs outside of accounts payable,
companies who undertake streamlining this process realize great
results down the line. Minimizing blanket POs, curtailing after-the-
fact POs and correcting price changes are best practices that garner
benefits for both purchasing and accounts payable departments.
Annual Vendor Statement Reviews:
Companies should put a process to audit the top 100-200 suppliers'
statements by merely requesting a statement and comparing that
balance to what is on the books. This is an easy way to discover open
credits and thus, found money, but taking it a step further can yield
more relevant information. Auditing a statement first for matching
balances and open credits is essential, however by looking deeper,
for invoices over 180-days can shed light on where real lapses are
occurring. Knowing where weaknesses exist allows a company to
strengthen their business processes accordingly.
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ERROR PREVENTION
Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Monthly Self-Audit on A/P Processors:
When done consistently, a monthly self-audit of processors does two
things. First, it ensures that data entry standards, company policies
and processes are being adhered to. Secondly, it adds significance to
quarterly and annual reviews with on-going documentation
to assist in objective assessments.
Root Cause Logs:
Correction is vital to prevention. When errors are found or brought to
light, one of the best measures to prevent its future occurrence is to
drill down on the root cause. A simple log entry each time an error is
discovered along with a determination of the root cause can
illuminate real problem areas. Very often, what we suspect is the
problem, isn't really the core issue. A laser focus on causation can
initiate development of effective solutions.
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Even after a series of Best Practices are implemented
in an organization, the difficult truth is that
errors will still occur - they are inevitable in
even the most proficient accounts payable
departments. In a company where standards
are effective and processes are adhered to,
it can make sense to bring in a third-party
recovery audit team. Recovery audits can
provide valuable insight in those
organizations operations. When considering
a recovery audit team, there are
five major points to consider.
RECOVERY AUDITS
THE DIFFICULTTRUTH IS THATERRORS WILLSTILL OCCUR
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
The reach of the team must be determined. Are theyperforming statement reviews, sales/use tax audits, contract
reviews, duplicate payment audits or a combination thereof?Companies should be apprehensive of those audit services
who claim to do it all. Very often, the result is marginal qualityover quantity - money is usually better spent on choosingsingle areas of focus in order to obtain beneficial findings.
What is the methodology? In a practical sense, how is theaudit actually going to be conducted? On-site or in a virtual
environment with heavy emphasis on technology basedinvestigation? Each style has its merits, though some may
work better in your company than others.
Determining the communication style the team employs iskey. Essentially, when the team contacts vendors (andemployees) they are a de facto representative of your
company and ensuring that they do so in a way consistentwith company values is imperative.
What are the outcomes of the project? Understandingthe transparency of their process, whether updates areprovided daily/weekly, access to web updates and the
myriad of invoicing/payment issues should allcontribute to the decision making process.
What, if any, post-audit reporting is provided? Will anexecutable plan based on root cause determination be
provided? What long-term value will they bring to youroperation? Each of these factors will play into choosing the
best recovery audit service for your organization.
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
In the end, the lesson is that effective loss
mitigation efforts always yield tangible results. With
dedication and focus on a few key areas,
companies can drive profits back to the
bottom line where they rightfully
belong. Although overhauling the
areas where errors occur can seem
arduous at first, the recovery (and
future avoidance) of those errors
strengthens companies overall, both
financially and operationally.
LESSON LEARNED
EFFECTIVELOSS MITIGATIONEFFORTS ALWAYSYIELD TANGIBLE
RESULTS
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Karl Andersson graduated from SUNY Plattsburgh in 1991 with aBS in Accounting and a minor in Computer Science.He then went on to work Coopers & Lybrand (now
PricewaterhouseCoopers) where he earned his CPA and CISA.Then, for the next three years, he was a Manager of Business
Process Re-Engineering for the Dexter Corporation. At the time,Dexter was a Fortune 1000 company and Karl was actively
involved in international projects in both Europe and Asia. It wasduring this time that Karl was able to bring all of his education
and experience to the table while discerning how data solutionssucceed and fail in real world corporate environments. After his
time at Dexter, Karl was at Ernst and Young as anApplication Controls Consultant for SAP.
After ten years working in the audit and consulting sectors, Karlwas convinced that clients could be better served by a company
that understood how to deploy targeted solutions instead ofstatic half-measures. By combining his expertise in accounting
and computer science, he was able to design a revolutionarysoftware technology which delivers exceptional value to hisclients. Therefore, in 1999 Karl founded Technology Insight
Corporation (TIC) and set out to bring laser-sharp result-orientedsolutions to the Recovery Audit service industry.
Ever since its beginning, Karl has gathered ateam of industry experts to support TIC and its
clients with dedication to the core values ofprofessionalism, respect and integrity. His leadership is
grounded in TIC's promise to bring sustainable solutions toevery organization they work with.
KARL ANDERSSON
KARL ANDERSSON
TECHNOLOGY INSIGHTCORPORATION
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Technology Insight Corporation 2 Mount Royal Avenue, Suite 400 Marlborough, MA 01752Phone: 508-480-8990 | Fax: 781-634-0500 | Web: www.technology-insight.com
Since 1999, Technology Insight Corporation (TIC) has provided companieswith results-oriented solutions to effectively manage every aspect of the
Purchase-to-Payment data cycle. By combining revolutionary softwaretechnologies with practical root-cause analysis, TIC brings an
unprecedented level of value to their clients. TIC understands that millionsof dollars are at stake for their clients and is committed to a distinct end
result: To reduce, recover, and redeploy lost profits.
The foundation of TIC is built upon an innovative approach to RecoveryAudit Services. Instead of the one-dimensional services that many other
companies provide, TIC dissects each component of the cycle; from spendmetrics to vendor master file analysis, in order to produce tangible results.
This comprehensive methodology is powered by groundbreakingsoftware which allows extremely large volumes of data from multiple
sources to be processed in record time. This level of efficiency means thatclients begin to see recovery in as little as 30 days.
Recovery Audit Services are supported by a proprietary web-based portalwhich allows TIC to perform most tasks off-site while still providing real-
time results to clients 24/7. Additionally, TIC believes so strongly in a truepartnership with their clients that Recovery Audit Services are contingency
fee based - they are paid only when the client realizes a recovery. Evenafter the audit ends, TIC offers additional solutions to enhance on-going
improvements. The DataShark A/P and Supply Chain Tools allowcompanies to harness their own future data for continuous improvements.
With a reputation built on results, TIC has assembled ateam of experts that embody the company's core
values of professionalism, respect, and integrity.These values dictate their conduct with every
client and bring a new degree of service to therecovery audit industry. Uniting TIC's people power with their
process power creates the kind of sustainable solutions thattoday's organizations demand.
TECHNOLOGY INSIGHTCORPORATION
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