A/P Becomes Strategic

By Andrew K. Reese

Procurement organizations at many companies in recent years have made significant progress in transforming their image from that of an administrative function — a paper-pushing cost of doing business — to that of a partner to the business that adds value by bringing sourcing, risk management, relationship building and other strategic skills to the table.

Now the Accounts Payable (A/P) organizations at some enterprises are going down the same path and moving away from being a tactically oriented, paper-processing function. At Greif, Inc., for example, the A/P organization at the Ohio-based global manufacturer of packaging systems is nearly three years into a transformation initiative that is helping the function become a strategic, value-adding partner to the business. For Greif, A/P is coming to mean "Advanced Payables."

Moving to Lean Payables

Barbara Myers, manager of central processing at Greif, says that the company's initiatives to improve its A/P function started in 2004 with a vision to bring Lean manufacturing concepts from the plant floor into the corporate offices to establish an administrative excellence model. "We were looking for a solution to eliminate the manual and non-value-adding activities that go into processing an invoice," Myers says. To that end, Greif's A/P function implemented a streamlined workflow process that managed how invoices were received and routed through queues before entering the accounts payable system for payment.

"That had a huge impact on the core processing time for invoices," Myers says, "but what was missing was the piece for getting the invoices into the system." Invoice entry was still manual, using an optical character recognition (OCR) process for scanning invoices into the system, which slowed up the whole payment cycle. In fact, it could take anywhere from 10 to 15 days from the time a supplier generated an invoice until the staff at Greif entered the invoice into their A/P system. The manual entry also introduced the risk of erroneous data being keyed into the A/P system, resulting in inaccurate payments or payments to the wrong suppliers.

Greif's Accounts Payable team realized that if they had a way to accelerate and streamline the invoice-entry process, they could both take time out of the invoice-to-pay cycle and increase the accuracy of payments. In fact, if they could take 15 days out of the process and ensure payment of the right amount to the right supplier, they would have greater opportunity to explore different value-added payment options on the back end. This could include early payment discounts that got suppliers paid faster while reducing Greif's costs. Streamlining invoice entry also would help the A/P team realize its vision of becoming a global shared services center working on behalf of Greif's locations around the world. "We wanted to be able to bring more volume through our department without adding headcount," Myers explains.

Taking a Cross-functional Approach