Are your processes on tilt? Often, a business becomes so mired down by system restrictions and

regulations that its employees spend more time and resources on chasing a process than what the outcome is actually worth. Is your company using its resources in the right way to deliver value to your customers and shareholders?

Major Time Savings, Minimal RiskWhile working with a $250 million fleet management company, the Brown Smith Wallace process improvement team analyzed the company’s expense report process. The IRS requires receipts for purchases of $75 or more unless they are lodging related. This client required receipts for every purchase. When it came time to process the company credit cards and expenses, a lot of resources were used to track down receipts and people.

The team discovered that while they would still require employees to document information for review and approval of expenses, if the company required copies of receipts for $50 and above, instead of for every purchase, it would eliminate 44% of the related transaction time and work. Because 96% of the company’s transactions are for $50 or more, the company was able to continue to meet all of the business requirements and give back 44% of their internal resources as a tradeoff for receipt images for 4% of their spend.

Similarly, when called in to assist a $1 billion industrial manufacturer, the Brown Smith Wallace team found that 43% of expense transactions represented 4% of the company’s overall dollar spend. For its entire invoice management process, 75% of the company’s invoice transactions represented only 9% of their total spend.

Common Opportunity: The Purchase to Pay CycleA common process that every company deals with is the purchase to pay cycle. One of the greatest opportunities for savings in this cycle is the time and effort spent gathering documentation and approvals for transactions. By performing a business process assessment, the Brown Smith Wallace process improvement team can identify areas of opportunity for a company to get more value out of their processes.

The team looks at value from two lenses: customer value and shareholder value. To provide value to the customer, an organization needs a strong relationship with its suppliers and vendors. Vendors want to know they will be paid the right amount for the right services at the right time. The value to the shareholder or business itself is the confidence that purchases of products and services are made for the right items, with the right vendors, at the right price.

Typical strategies for improving purchase to pay cycles include transacting with vendors electronically instead of manually, working with vendors or within your own purchasing activities to address their billing frequency so that you can summarize multiple transactions into one, creating electronic images of all invoices upon receipt and using software to manage the review and approval for invoice activities.

Another forward looking realignment of this process is to adjust your match tolerance in checking if the purchase order, receiving document and invoice all match. Is it worth spending $50 in resources to find a $10 matching error? Yet another proactive fix is to receive approval for a spend decision on the front

end so approvals aren’t happening on the back end after invoices are received. This empowers an organization to be paid at the right time, take advantage of discounts, and utilize their resources to better serve the requirements of the customer and shareholder.

To find out if your company’s processes are on tilt, you can follow this four-step analysis:

1. What are the requirements of the process from the perspective of the shareholders and the customers?

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Don’t Spend 90% of Your Time Chasing 10% of Your Risk

Kristin Parshay ManagerAdvisory Serviceskparshay@bswllc.com314.983.5207

© 2014 Brown Smith Wallace

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Don’t Spend 90% of Your Time Chasing 10% of Your Risk

© 2014 Brown Smith Wallace 2

2. What are we doing today to meet those requirements and how are we doing in meeting those requirements?

3. Are we using our resources in a valuable way to meet those requirements, or are we doing something that doesn’t matter and should be eliminated?

4. What changes can be made to the process, to adjust internal controls and policies, to make sure we’re getting the appropriate return on resource investment?

Connecting the DotsHow well a business connects the dots to create value depends on four crucial considerations: understanding the voice of the customer; mapping and measuring the process in place today to deliver the customer requirements; understanding whether your resources are utilized for activities that create value for the customer; and, if not, taking action.