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6 ways to get your shared services and AP in order.

When talking about accounts payable, the analogy of an oil leak in your car is often useful. You're driving around thinking everything is okay, not realizing that a steady drip of oil from your vehicle is wasting resources and is going to hit hard when your motor finally blows.

Every day, leaders across industries in purchasing, disbursements and accounts payable are challenged to locate, stop and even reverse the steady leak of money leaving their organizations due to overpayments, duplicate or erroneous payments, or outright fraud. Too often, their efforts are stymied by the lack of a clear plan or goals. There can also be a reluctance to take the necessary steps to get their house in order, particularly when there are numerous other projects underway.

Leading accounts payables organizations are able to undertake these improvements (either through services or technology solutions) in parallel with other company initiatives. Managers erroneously think it's going to involve a huge commitment of time and resources to improve their processes. While there's certainly effort involved, it's rarely, if ever, on the scale people imagine it will be.

Today's advancements make it easier than ever for companies to reverse the trend of money leaking away from their company. In addition, the return on investment of these improvements is almost always very compelling.

Below are six processes your AP department can use to establish internal AP controls and save costs, improve performance and achieve full ROI.

(1) Reclaim Lost Revenues With a Recovery Audit. Accounts payable is ripe with opportunity for error and fraud--and for recovery. A recovery audit is an after-the-transaction event that examines everything from pricing, shipping and currency errors to improperly applied taxes and missed cash discounts. The audit serves a two-fold purpose. One is to reclaim lost revenue. The primary benefit of a recovery audit, however, is the roadmap it provides your business to improve operations and shore up internal controls. The ability to take specific actions to stem further loss with proven prevention tools recommended via the audit more than recoups your time and financial investment in the process. In fact, the insights gained from a recovery audit can facilitate proactive controls and process improvements that reduce friction in the supply chain between buyers and suppliers. Leverage of analytics and automation, including predictive analytics, optimizes the timing and efficiency of recoveries and provides clues as to why the overpayments happened in the first place, smoothing relationships. Companies may then leverage the data and the communications with the supplier to other value streams, like vendor master cleansing and dynamic discounting.

(2) Create Harmonious Supplier Management Relationships. While it may seem obvious, it's amazing how often keeping up good relationships with suppliers gets lost in the shuffle. Make it easier for suppliers to do business with your company and watch relationships flourish. One way to accomplish this is to leverage technology solutions such as vendor portals. These solutions allow vendors to onboard quickly and offer self-service capabilities.

In addition, many Internet-based solutions work with AP vendor master file data, and your existing ERP system, so mistakes caused by data-level inconsistencies can be avoided. Your company will recognize cost savings from the elimination of duplicate payments, the early detection of potential fraudulent activity, and the ability to leverage cash from the early payment discounts.

(3) Use Benchmarks and Standards to Your Advantage. Companies are quick to benchmark their standing in the marketplace, yet often fail to apply those same standards and levels of accountability to their shared services departments. By examining what other industry leaders are doing--and how you stack up--you can implement new best practices, drive initiatives and give your staff a model for growth.

Companies overestimate the time and effort it takes to do a benchmarking study. You can complete one, even in a large organization, in about two weeks and have a roadmap for areas in which your company is leading or lagging in terms of best practices. A benchmark study in one company revealed a cost per invoice of $1.50 that was substantially higher than the average found at comparable Fortune 500 companies. This company had a manual process for processing invoices and the benchmarking exercise allowed them to see what they needed to change to become a best practices shop.

(4) Engage in Fraud/Risk Assessments. No one likes to admit fraud may be occurring on his or her watch. But adopting a head-in-the-sand approach as money walks out your door, or potential fines and negative impact on brand due to an OFAC violation or doing business with a supplier on one of many global watch lists, isn't going to score you points, either. What can earn you kudos from above is having the courage to not only identify fraud, but to install systems and processes that preclude those same losses from occurring in the future. The first step is educating yourself about what, how and why fraud occurs within your doors. This is the fraud/risk assessment.

From there, similar to the recovery audit, you'll identify at-risk vendor characteristics and build up-front internal processes to help you fight fraud and catch payment mistakes. Even better, a portal that conducts checks and validation in real-time, upon vendor setup, is a proactive control that mitigates risk and fraud.

(5) Leverage Technology. You're familiar with the saying, "You have to spend money to make money?" It's true in a lemonade stand and it's true in the world of AP and shared services. To prevent errors and address the underlying causes behind overpayments, duplicate payments, fraud and other hidden procure-to-pay risks, an investment in leading AP technology can mean the difference between success and failure. Using proven systems with built-in continuous monitoring--while requiring an upfront investment--can return hundreds of thousands of dollars on the back end. It's entirely common for a company to pay $100,000 for software and discover duplicate payments of $150,000 in week one. Technology almost always pays for itself in this area. As an incentive, today's leading systems can be installed with minimal disruption to workflow.

(6) Employ (the Right) Metrics. Knowledge is Power. When it comes to AP and shared services, what do you want to measure--and why? Companies frequently overlook key data within their AP and shared services departments that, when leveraged, could help boost productivity and push forward process-improvement goals. Metrics can be pulled from ERP systems, legacy systems, purchasing-card data sources and more to create a 360-degree picture of the state of your AP and shared services.

The bottom line is that it takes courage and conviction to commit to cleaning up your AP and shared services systems. New software and continuous monitoring closer to the transaction will also keep your money where it belongs--in your business. And--just like the car that leaks oil--ongoing tune-ups will catch problems before they start, and keep you running smoothly.

Helen Tueffel is senior vice president of global marketing and business development at APEX Analytix, LLC. Bob Knowles, vice president of North American regional sales for APEX Analytix
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Title Annotation:SHARED SERVICES
Author:Tueffel, Helen; Knowlese, Bob
Publication:Financial Executive
Geographic Code:1USA
Date:Mar 22, 2015
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