Transcript Slide 1

© 2012 Financial Operations Networks LLC
Transform AP
With Best Practices
About the Speaker
Tom Nichols
President
Process Management Improvement, Inc.
Tom is past president and charter board member of
the International Accounts Payable Professionals Inc.
(IAPP). Tom is former director of financial operations
for AT&T’s corporate accounts payable and payroll management. Tom
was with AT&T for 35 years and is highly experienced in financial
operations, procurement, information technology, manufacturing and
materials management. He pioneered the introduction of electronic
invoicing and ordering for accounts payable and purchasing within
AT&T. Currently, as president of Process Management Improvement
Inc., Tom provides research, AP process improvement consulting, and
seminars to large companies and financial associations.
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Best is the enemy of Better.
We’re Good; how do we get Better?
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Remember the old adage
“If it isn’t broken don’t fix it.”
“If it isn’t broken – Maybe you just aren’t
looking hard enough.”
Today, just because something isn’t broken
doesn’t mean it can’t be improved.
Don’t settle for complacency, but embrace
transformation and change.
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Today’s AP Transformation
Business Model
• Flexibility and speed in addressing client demands
• Provide for integrated end-to-end solutions
• Responsive cost structures
• Business processes that adapt to emerging
technology
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Accounts Payable
Transformation Strategy
• Be viewed as a business partner and not an
overhead function
• Focus on customer satisfaction
• Reduce cost and become more efficient
• Improve the skills of your workforce
• Use technology more effectively
• Respond more quickly to innovation opportunities in
your process
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Transformation Factors
The four P’s
• Purpose – What is your organization’s purpose?
• People – Are your people engaged?
• Process – How is enhanced technology being
utilized? How are innovative solutions being
implemented?
• Performance – How are you measuring the
organization’s progress?
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Mission – Vision - Values
• Without a Mission - There is no purpose
• Without a Vision – There is no destination
• Without Values – There are no guiding principles
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Walt Disney’s Purpose
“Make People Happy”
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Minister of Finance,
South Africa Purpose
• “We have adopted “Business Unusual” as our rallying
cry. The challenges that confront the organization
cannot and indeed must not continue business as
though the operating environment is normal.”
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Accounts Payable Purpose
My View:
• “Be perceived as a business partner that adds value,
by providing accurate and timely payments and
actionable financial data to the clients we support,
efficiently and cost effectively.”
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Organizational DNA*
• Organizational DNA is a metaphor for the underlying
factors that together define an organization’s
personality and help explain its performance
• Organizations are run by individuals. Their values,
beliefs and skills make up the organizational DNA
• The four building blocks of Organizational DNA are:
― Decision Rights
― Information
― Motivators
― Structure
* Source: Booz Allen Hamilton
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Organizational DNA (Cont’d.)
• DECISION
― Who decides what?
― How many people are involved in the decision process?
― Where does one person’s decision-making authority end
and another’s begin?
• MOTIVATOR
― What objectives, incentives, and career alternatives do
people have?
― How are people rewarded financially and non-financially for
what they achieve?
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Organizational DNA (Cont’d.)
• INFORMATION
― What metrics are used to measure performance?
― How is knowledge transferred?
― How are expectations and progress communicated?
• STRUCTURE
― Here’s our org chart, but let me tell you how it really works
around here
• SUMMARY
― The right people, with the right values, armed with the right
information, and motivated by the right incentives are the
driving force behind successful organizations.
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What Makes
Organizations Great?
• Management is efficient in climbing the ladder of
success. Leadership determines whether the ladder
is leaning against the right wall.
• Visionary leaders
― Define a course of action consistent with the organization’s
strengths
― Demonstrate a passion for operational excellence through
consistent execution
― Have a solid commitment toward employees and a constant
willingness to evolve in the direction of customers needs
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“There is very little difference in people, but that little
difference makes a big difference. The little difference
is attitude and the big difference is whether it is
positive or negative.”
— W. Clement Stone
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What Do People Want?
• Improved ability to achieve work and personal life
balance
• Increased appreciation of, and respect for individual
contributions made while working in a team
environment
• Active involvement in the creation of a shared vision
• Empowered to make the decisions to get the
job done
• Demonstrate flexibility to change
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Three Types of Employees
• Engaged
― Work with passion and feel profound connection with their
company. They drive innovation and move the organization
forward
• Non-Engaged
― Employees are essentially checked out. They are
sleepwalking through the work day with no passion for their
work
• Disengaged
― Employees are not just unhappy, they are busy acting out
their unhappiness. Every day these workers undermine
what their engaged co-workers have accomplished
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Gallup Poll - Survey Results
1000 – U.S. Workforce
• Engaged
29%
• Non-Engaged
56%
• Disengaged
15%*
*Bottom Line Impact: $300+ Billion
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Tower Watson
Global Report
• Study included 90,000 workers in 18 countries with
the following results:
― Engaged Workers
• 19% improvement in operating income
• 28% growth in earnings per share
― Lowest level of Engagement
• 32% decline in operating income
• 16% decline in earnings per share
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The Processes
Understanding them is critical
Managing them is vital
Automating them is essential
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A 5% reduction in operating expense
has the same impact on your P&L statement
as a 30% increase in sales.
Source: Gartner Group
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Supplier/Customer Model
Who A/P Deals With
Handoffs
sent to:
Inputs
received from:
•
•
•
•
•
•
Purchasing
Accounts Payable
Employees
Vendors
Travel Provider
P-Card / Credit Card
Other parties:
Other Internal Systems • Information Technology
• Records Management
• Legal
• Internal Audit
• External Audit
• Taxing Authorities
• Regulatory Authorities
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•
•
•
•
•
•
•
General Ledger
Bank
Payroll
Tax
Treasury
Vendors
Employees
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A/P Square Wheels
• In many A/P organizations, over 70% of invoices are
still paper based
• Routing and approval process – 60% manually
• Paper invoices are the enemy of efficiency (cost and
resources)
― Invoice errors
― Lost invoices
― Overpayments
― Lost Discounts
― Vendor inquiries
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Ten Commandments of
Process Improvement
1. Thoroughly understand your current processes
2. Put customer first
3. Foster creativity and innovate constantly
4. Design quality into services
5. Improve everything continually
6. Create and support a safe and open workplace
7. Don’t shoot the messenger
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Ten Commandments of
Process Improvement (Cont’d.)
8. Use time wisely
9. Involve everyone
10. Measure and communicate your success
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Accounts Payable Priorities
• Reduce cost by leveraging new features and
functionality
• Focus on strategic initiatives tied to company
objectives
• Ensure compliance to meet regulatory requirements
• Provide better and faster information for timely
business decisions by reducing cycle times
• Ensure flexibility to successfully manage the ever
changing business requirements
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Transforming the
Process into Reality
• Innovative AP Managers are focused on generating
“Bottom Line” savings for their clients by:
― Accelerating process improvement initiatives
― Managing discounts
― Managing spend
― Improving working capital
― Building stronger trading partner relationships
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Performance Management
“If you are not keeping score you are practicing.”
“Success can only be measured by keeping score”
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Performance Measurements
• Should be part of your management system, not
accounting
• If you can’t measure the process you can’t manage it
• Should be relevant to your employees, customers
and your bottom line
• Timely
• Actionable
• Rational
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Performance
Measurement Elements
• Performance measurement is a process that includes
the following elements:
― Setting strategies and goals
― Defining key metrics (KPI)
― Measuring and monitoring performance
― Analyzing and reporting on performance
• Measurements provide key decision makers with
answers to three fundamental questions:
― How are we doing?
― Why?
― What should we be doing differently?
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Financial Perspective
Average Financial Staff Per Billion Dollars of Revenue
Hackett Book of Numbers
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Financial Organization:
Best Practices
• 50% less finance cost than peer group
• 57% less resources than peer group
• 32% less time collecting data
• 42% more often analyzing data
• 32% of resources more likely to have both finance
and operational experience
• 45% more often addressing future strategies
Hackett and Aberdeen survey results
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Questions
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© 2012 Financial Operations Networks LLC
Thank You!
For further information on this topic, contact
The Accounts Payable Network
2100 RiverEdge Parkway, Suite 1010
Atlanta, GA 30328
Contact: [email protected]
866-827-6389
770-984-1184
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