In 2005, Composites One processed 145,000 invoices. Most went through without a hitch, but 5,800, or 4%, were held up because of unacceptable variances between the invoice and purchase order amounts. "Each time that happens, someone has to look into the discrepancy to determine if the invoice amount is correct," says Mary Bravo, assistant treasurer. The extra 20 minutes it takes to further research each reject, or purchase pricing variance (PPVs), adds up to higher costs and lower productivity.
That was not acceptable. So the distributor of fiberglass and composite materials launched a mission to improve accounts payable efficiency through automation. From the outset, the goal was to eliminate unnecessary additional key strokes or further communications with suppliers, while also reducing opportunities for inaccurate cost reporting
The plan worked. By the end of 2007, PPVs represented only 1.27% of invoices, and that figure should fall to 0.50% by year's end. That translates into a savings of 40 man-hours per month this year alone, says Bravo. "Not only are the numbers down, but, in each of these cases, the correct cost is associated with that item from an accounting and sales reporting (margin) perspective," Bravo says.
The Arlington Heights, Ill., company started testing automation, but only with its biggest clients several years ago. The discussion first centered on imaging, but soon turned to development of a file transmission system. In this process, files are mapped to replicate manual posting for invoice vouching and are matched against open purchase orders and receipts. The process, explains Bravo, is similar to an automated posting of a lockbox download. "Success with our largest vendor has provided close to a 70% hit rate on auto vouching," says Bravo.
Overall these efforts have allowed Composites One accounts payable department staffing to be reduced by two full-time equivalents, says Bravo. "Each time a touch point is eliminated and the vouching process automated, the accounts payable department can focus its continued efforts on improving exception handling processing."