For years, the treasury team at American Standard Companies Inc., the $9.5 billion producer of bathroom fixtures, air conditioners and car brakes, used a pretty standard three-way matching system to pay invoices. Outgoing payments were first matched against the purchase order, then against the goods delivered to the shipping dock, and finally, against the invoice sent by the supplier. That changed when, in 2003, Marc Willensky from treasury led a team in an analysis of the payables system and found that it was causing labor redundancies, input errors, payment delays and even preventing the overworked department from taking on new business.

The inefficiency in the process, the team decided, lay in the final step, which was to issue a supplier invoice. So the solution became simple: Bypass the supplier invoice altogether. Not only has the new system reduced errors–since invoice data no longer has to be manually entered into the payables system–it has also sped up the payment cycle because the finance department doesn't have to wait for invoices to be forwarded by various business units.

The process changes saved American Standard $300,000 in labor costs in 2004 and earned it $600,000 in early payment discounts from its suppliers. "It was all about streamlining the payables process," says Scott Massengill, vice president and treasurer. "Now, when the goods come in, they're scanned into our receiving system, which is automatically fed into our payables system. We pay based on the quantity of goods that were received at the shipping dock and based on the price in the purchasing order that we initiated."

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