Transactional Costs Supplier Invoices Using Lean
18
Transactional costs: lean efficiencies for Invoice approval and payment process Optimise-GB
Transcript of Transactional Costs Supplier Invoices Using Lean
Transactional costs: lean efficiencies for Invoice approval and payment
process
Optimise-GB
What are Transactional Costs
Transactional costs when buying a banana
The Banana itself
The energy and effort it requires to choose between the varieties of bananas
The cost of travelling from your house to the store and back
The time waiting in line, and the effort of paying.
Optimise-GB
What is the process of authorising and paying supplier invoicesOptimise-GB
Optimise-GB
What is Lean?Lean is a practice that considers:
• Expenditure of resources that is not for the creation of value for customers
• Wasteful use of resources and is a target for elimination.
• Creating more value with less work.
Optimise-GB
Optimise-GB
Printing invoices before doing anything with them
Stock Piling invoices and not inputting them onto the system
System downtime, approvals from management
Re-entering data, photocopying invoices for management approval
Errors in coding of invoices
Walking to/from copier, central filing, fax machine
Posting invoicesto managersand supplier
Managers having to go through levels of approval before an invoice is paid
Lean ThinkingOptimise-GB
Any efficiency creating initiative requires a structured approach...
We will be using invoice approval and payment as an example
1. Customer RequirementsPaying supplier Invoices
Optimise-GB
- All Invoices to be electronically communicated
- Speed up payment process to suppliers
- Reduce bank charges for paying suppliers
- Reduce postage costs
- Reduce Transactional costs of paying suppliers
2. Current State: Risks & Issues of current process
Risks with process Impact of risk
Managers forgetting that they have already authorised an invoice
Invoices paid twice
Invoices are lost Invoices Paid out of agreed payment terms
Other issues Impact of issue
Using many suppliers No economies of scale, lack of control
Invoices being posted back and forth Postage costs eating into profits
Optimise-GB
2. Current State:Paying supplier Invoices
Optimise-GB
1. Supplier
Accounts2. Input Invoice
Manager3. Approve
Invoice
Accounts4. Pay supplier
on system Supplier
Supplier sends Invoice by post
Accounts departments send the cheque payment by post
Takes 3 Days to receive an invoice 10 Mins
process15 mins process
It takes 3 Days for the invoice to be received
It takes 3 Days for the supplier to receive the cheque
10 Mins
Accounts send the invoice by post to the manager
Takes 3 Days to receive an invoice
Start Here
Optimise-GB
2. Current State:Paying supplier Invoices
Process Process Time
Waiting Time
Labour Cost
Postage Costs
Bank Charges
Total Costs
Awaiting invoice from suppliers
0 Mins 3 Days £0.00 £0.00 £0.00 £0.00
Input Invoice 10 Mins 0 Days £2.00 £0.00 £0.00 £2.00
Post to manager 0 Mins 3 Days £0.00 £0.30 £0.00 £0.30
Approve Invoice 15 Mins O Days £3.50 £0.00 £0.00 £3.50
Send back to Accounts
0 Mins 3 Days £0.00 £0.30 £0.00 £0.30
Pay supplier on system
10 Mins 0 Days £2.00 £0.00 £0.00 £2.00
Send cheque in post
0 Mins 3 Days £0.00 £0.30 £0.40 £0.70
35 Mins 9 Days £7.50 £0.90 £0.40 £8.80
3. Future State:Identify solutions
Optimise-GB
1. Supplier
Accounts2. Input Invoice
Manager3. Approve
Invoice
Accounts4. Pay supplier
on system Supplier
Supplier sends Invoice by post
Accounts departments send the cheque payment by post
Takes 3 Days to receive an invoice 10 Mins
process15 mins process
It takes 3 Days for the invoice to be received
It takes 3 Days for the supplier to receive the cheque
10 Mins
Accounts send the invoice by post to the manager
Takes 3 Days to receive an invoice
Start Here
Create PO system so
managers do not need to see invoices
Pay suppliers by BACS
Send Invoice
by email
3. Future State:Paying supplier Invoices
Optimise-GB
1. SupplierAccounts
2. Input Invoice & Match Invoice against PO number
& Pay Supplier
Supplier
Supplier sends Invoice by email
BACS Payment15 Mins process time
1 Day process time
Start Here
Instant, no waiting time
There are now only 2 process steps to pay an invoice instead of 4, and done in 10% of the time
Optimise-GB
3. Future State:Paying supplier Invoices
Process Process Time
Waiting Time
Labour Cost
Postage Costs
Bank Charges
Total Costs
Awaiting invoice from suppliers
0 Mins 0 Days £0.00 £0.00 £0.00 £0.00
Input Invoice, match against PO number and pay invoice by BACS
20 Mins 1 Days £4.00 £0.00 £0.04 £2.00
20 Mins 1 Days £4.00 £0.00 £0.04 £4.04
Optimise-GB
Optimise-GB
4. Project Plan (simplified)
What When by Who Date Complete
Set payment system to issue BACS instead of cheques
30th June Accounts Payable
Change business processes per 3: Future state process
31st July Internal Audit
Create a Purchase order process that requests manager to send a PO form for all supplier orders
30th August IT / Accounts Payable
Request all suppliers to issue invoices by email
30th August Accounts Payable
Ensure: - People understand their responsibilities - People have the appropriate skills to complete the activity - Review the project plans / activities on a regular basis - Communicate, communicate, communicate
For other solutionsContact
Simon Misiewicz through Web: www.optimise-gb.com
Email: [email protected] or
Optimise-GB
