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

Business Case

  • 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%
Typical Drivers for invoices Paid Late

  • 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
Business Impact

  • $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