Persevering and Prospering in the Time of COVID-19: Accounts Payable

Jay Thompson, Managing Director Business Performance Improvement
Erin Progelhof, Managing Director Business Performance Improvement

The accounts payable (AP) function has a significant effect on the bottom line, third only to sales and receivables. Now, many accounts payable teams have been caught short by the Coronavirus 2019 (COVID-19) pandemic, finding themselves unable to shift rapidly and securely to a remote payables workforce. Some businesses – whose workforce capabilities and processes are extensively paper-based – may not have been able to shift to remote work at all. This challenge is only one aspect of the finance disruption wrought by the pandemic. In situations like these – and even in situations where remote work is better supported by systems – enterprises are experiencing dramatic reductions in productivity, even as the volume of transactions has increased for some industries.

There is reason to be hopeful, however. Even as accounting leaders were coming to understand the pandemic’s gravity and far-ranging effects, transformations were already under way for some businesses’ payables departments. Some have found it possible to delay payments to ease their cash positions. Some are using their demand leverage to negotiate more favorable payment terms or discounts for early payments. Others are reducing the cost of AP processing itself and increasing efficiency with the use of optical character recognition, workflow and process automation. And many businesses have resorted to teams in a managed business services (MBS) arrangement that blends highly skilled operational resources with consultants and the clients’ own staff to deliver dramatic productivity gains with embedded quality control across all of these efforts.

The MBS strategy follows proven, repeatable processes to build teams, onboard skilled remote resources, and improve systems and processes to address specific challenges. Oversight of the transformation efforts and the ongoing work ensures maximum productivity, quality and security. Below we share three examples of how our MBS teams helped overcome recent AP challenges.

Example 1: Using Data to Target Improvements

One company had recently completed implementation of a new enterprise resource planning (ERP) system. Shortly after, they found they were faced with accounts payable errors and delays, which caused significant disruption to their supply chain. Our MBS team was able to identify the root causes for these disruptions and use that information as the basis to deliver three distinct improvements.

  • By analyzing on-hold transactions by reason code, approver and supplier, the team was able to clear a significant number of transactions valued at roughly ten million dollars.
  • By finding that nearly 40% of credits originated with only two vendors, the team introduced efficiencies by redesigning credit and rebilling processes for those vendors.
  • By finding that a few vendors were responsible for tens of thousands of the invoices, the team was able to target process improvements for just those vendors, resulting in fast-tracking and efficiencies that eased all accounts payable operations.

Example 2: Automating to Eliminate Backlogs

A vacation resort operator had centralized their accounts payable function, but they had not considered process improvement opportunities when they consolidated offices. As a result, AP staff were overwhelmed by a backlog of invoices as inefficiencies were compounded in the newly centralized office. The MBS team added virtual resources to eliminate the backlog while automating invoice processing in parallel. While these efforts were underway, the team provided training and guidance to the AP staff and operations personnel to improve adoption of new standard procedures. Lastly, the team created reports based on newly identified key performance indicators that were used to monitor the higher levels of throughput enabled by the redesigned processes.

Example 3: Integrating AP Systems and Staff Post-Acquisition

Another firm had completed several acquisitions to drive growth, at a rate of one acquisition a week. They needed immediate assistance to integrate back-office systems. One specific client requirement was to develop a scalable AP process design while retaining the entrepreneurial, independent spirit and culture of the acquired staff. An MBS team from Protiviti supplied experienced professionals to implement process improvements and brought in accounting experts to run daily AP operations. The transformation also included sourcing a new AP manager to oversee the function whose employees had only just transitioned to working remotely. Pandemic conditions required the recruiting, hiring and onboarding of the new manager to happen via teleconference. Once in position, he had to recruit accounts payable leads and clerks by the same method. The team identified local resources who will work remotely now but be on site once the pandemic subsides. It’s significant to note this manager was onboarding new subordinates 48 hours after starting his new job without ever meeting his superiors or new team face-to-face. We supplied new metrics and reports to demonstrate improvements to AP performance through these changes. What’s remarkable is that this entire transformation was accomplished over the course of a few weeks during the pandemic, demonstrating to the company the value of its entrepreneurial and independent culture in action.

In all three examples, deploying blended teams that include not only experienced accounting personnel to address operational needs, but also seasoned consultants to improve processes and systems, helped resolve problems and effect dramatic improvements. Dynamic teams like these can start performing rapidly on the operational challenge at hand and scale up or down to meet client needs. Backlogs can be diminished rapidly, new systems deployed, and enduring process efficiencies can implemented to effect lasting improvement to the payables function, even in the current difficult business climate.

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