Procurement in SolutionsWhere is place located?

Log in to follow, share, and participate in this community. Not a member? Join Now!

Have a question?

Have a question or issue that other Ariba Procurement Solutions users can help answer? Post it here.

 

To access Ariba Connect portal, click here.

Recent Activity

Refresh this widget

Recent Blog Posts

Refresh this widget

Ariba® Procure-to-OrderTM, Ariba® Procure-to-PayTM Professional, and Ariba® Services ProcurementTM solutions: 

 

The Re-collaborate button appears on a requisition line item when all of the following are true:

  • The requisition is a change order version.
  • The item is collaborative on the previous version of the requisition.
  • The item configuration requires or allows collaboration.
    • For category items: This is configured within the associated category definition file (CDF).
    • For collaborative requisitioning: The user must belong to the Dynamic Collaboration User group to collaborate.

No site-level parameter exists related to re-collaboration in the system.

 

** Content shared by Matt Hawk, Ariba Commerce Support Engineer**

Imagine it's the year 2020.... Procurement has evolved so much over the past decade, you barely recognize it. Its functions have been decentralized –or outsourced– leaving leadership to focus on very different things. Job descriptions have changed dramatically. What's more, suppliers seem to have infiltrated the organization!

 

You look around, take it all in, and think, "I wish I'd been better prepared."

 

Ten years ago, procurement was viewed largely as a backroom function. Today, it is a strategic capability that companies leverage to fuel competitive advantage and growth. What will procurement look like in another decade? To find out, Ariba, Inc. (Nasdaq: ARBA), the leading provider of business commerce solutions, has opened a dialog with the world's top procurement executives and practitioners. The project, called Vision 2020, aims to help shape the future of procurement through an online forum (www.futureofprocurement.com) in which leading thinkers can their insights on an ongoing basis.

 

"Procurement has undergone a significant transformation over the last ten years, but more change is in store," said Tim Minahan, Chief Marketing Officer, Ariba. "As companies move to gain competitive advantage, procurement executives are increasingly leveraging new business models that allow them to improve productivity and profits and deliver their organizations to new worlds of excellence."

 

So what do these executives think the future holds?

1. Everything will be Automated. Procure-to-pay (P2P), sourcing, contract management and other automation engines will be integrated up and down supply chains, fully adopted, and operating flawlessly.

2. Information Will Be Synthesized. Ready access to accurate, timely, structured data on spending, risk and performance will create unprecedented abilities to integrate information in support of sourcing decisions and performance management.

3. Virtual Will Replace Physical. Forget jumping on planes and sitting at conference tables. Smart phones, tablets, embedded chips, and not-yet-imagined devices—will create a massively virtual work environment for procurement and suppliers.

4. Data Will Become Predictive. Procurement has spent the last decade looking backward in time—at money spent last year, supplier performance in the past week, month or quarter. The coming decade will bring information and models that look forward.

5. Prices Will Become Transparent. Market pricing for goods and services will become so transparent—due to e-sourcing, cloud sourcing, outsourcing, and procurement's intrepid scrutiny into categories still cloaked in pricing mystery—that negotiation will become a lost art form.

6. Spend Management Will Disappear. Companies will still care about managing their spending, they just won't have large, discrete, enterprise-level organizations dedicated to doing it.

7. Outsourcing Will Explode. Many current procurement and sourcing activities—the ones that do not get redistributed to internal end users of goods and services—will be outsourced.

8. Sourcing Geeks Will Vanish. While valued highly in today's marketplace, people who excel at sourcing processes or at being power users of procurement and sourcing automation technologies will find themselves working for third-party services firms—or not at all.

9. Attention Will Turn Outward. The last 10-15 years have seen intense inward focus by procurement. In the coming ten years, the emerging supply management network will turn its attention outward to end-customers, suppliers, and the innovation that ties them together.

10. Price Will Give Way to Value. There is optimism that procurement is going to crack the code on business-value segmentation and measurement in the coming ten years.

 

Vision 2020

 

What will your job look like in five or ten years? Ever wonder? We do. So we asked some seasoned and visionary leaders for their predictions about the future of procurement, 10 years down the road. Some 30 interesting ideas emerged. A few of them fall under these headers:

#7 : "Bye, bye procurement"

#16: "Talent competition heats up"

#24: "Suppliers gain power"

#25: "New biz models emerge"

#27: "Firms wake up to supply risk"


Starting in late 2010, Ariba joined forces with leading procurement practitioners and influencers to begin a dialogue with two intermingled sets of procurement executives:

  • The first represents a visionary and highly seasoned set of procurement executives—the people who rolled up their sleeves in the early 1990s and conducted the arduous work of leading procurement from tactical paper pushing into things like spend management, strategic sourcing, supplier collaboration, electronic commerce, sourcing and procurement process.
  • The second group represents today's vanguard—Chief Procurement Officers in charge of high-performing spend management organizations—who will lead procurement to new and innovative kinds of value contribution over the coming decade and beyond.

 

For additional predictions, or to join the conversation, visit: www.futureofprocurement.com

As purchasing systems evolve and offer more process flexibility and expanded payment options, it is imperative that procedures be re-engineered to eliminate weaknesses that allow duplicate payments. The extent of the problem of over payment varies across companies and industries. However, it has been estimated that as much as 1% of all corporate remittances are duplicate or inaccurate payments. Should you realize that some of your current, or planned, processes are not consistent with the recommendations that follow, it does not mean that you have rampant duplicate payments. It is intended as a checklist to ensure you have done your best to provide the process controls to minimize payment error. And that you have established the necessary reporting for effective and frequent audit of disbursements.

 

Establish formal processing standards

• Accounts Payable should own the invoicing process

• Pay extra attention to past due invoices

• Require the supplier to identify the payment method on invoices

• Minimize check requests

• Pay invoices on time

• Require requisitions for all but the smallest expenses

• Create and train personnel on data entry standards

• Worksheet spreadsheet should be based on a standardized template to prevent data error

• Perform regular maintenance on the vendor master

 

Accounts Payable Should Own the Invoice Process

Without a strict policy of invoice processing initiating with accounts payable they often circulate through the company. When this happens, payments are delayed, a second invoice is often issued, and, as discussed above, those second invoices can be mistakenly paid. If processors do not use the same strict coding standards when entering invoices those second invoices will appear to be new when they show up resulting in a duplicate payment.

 

Pay Extra Attention to Past Due Invoices

There is a chance they have already been paid, perhaps using an alternate payment vehicle such as a wire transfer or p-card. Develop routines to check that payment hasn’t been made whenever an invoice that is really past due is for payment.

 

Change Invoices to Reflect Payment Method

Invoices paid by purchasing or credit card at the time the services or goods are requested may be the hardest to fix. Often vendors claim they cannot suppress the printing of invoices and continue to send them even though they were paid at the point of purchase (POP) with a credit card. One step you can take to guard against paying these vendors twice is to train invoice processing staff to check invoices closely. Many of the vendors who cannot suppress the printing of the invoice will mark it with a note saying it was paid by credit card. Many of these notes are in very small print so your staff will have to look closely to find the note.

 

Minimize Check Requests

Organizations rely on check requests to varying degree. Problems arise when backup is incomplete or even nonexistent for an invoice paid by check request. If an invoice is not attached, or the information is not keyed into the system immediately, a duplicate payment is often created when the original invoice finds its way into accounts payable. Research shows that rush checks (often issued with a check-request form) are one of the leading causes of duplicate payments. We realize that check-request forms and rush checks are here to stay. What we recommend is a stringent requirement for backup and that invoice information is keyed every time a check is issued. Before checks are released some routines should be incorporated to check for duplicates. Most organizations focus on larger payments during this checking. If you do not regularly follow up on uncashed checks and keep all back up documentation, you may find the unclaimed property auditors deeming those amounts as unclaimed property. Follow up and document to avoid having to turn those funds over to the states.

 

Paying on Time

Paying late may improve your cash flow; but it can actually lead to duplicate payments. When a vendor hasn’t been paid within 30 days, most issue another invoice. Unfortunately, these second invoices occasionally get paid. It is recommended that all organizations need corporate approval before unilaterally stretching payments to improve cash flow. Requisitions should be Required Relying on an account payable’s memory as a guard against duplicate payments is one of the weakest and most ineffective ways to protect against this problem. Ariba P2P will raise an exception when a purchase order exceeds the approved amount. If no purchase order is issued for an item; there is no programmatic check against a duplicate remittance.

 

Example, if an invoice number is 000482, most OCR solutions will read in all of the digits, i.e. 000482, as the invoice number. If your manual process is not to enter leading zeros then you will entered the invoice as 482; causing a duplicate payment. Invoices without invoice numbers are another source of     duplicate payments. A standard process for creating an invoice number where one does not exist should create the same unique number no matter who uses the strategy. For example; Supplier Number plus invoice date creates will create the same number no matter who processes this invoice.

 

Standardize Spreadsheet Worksheets

Spreadsheets are another point of trouble. Data entered with leading zero’s (as in the example, 000482, above) in a spreadsheet will lose those zero’s. Uploading a spreadsheet to the invoice application can cause the invoice number to miss a duplicate. Any invoice processing spreadsheet should be based on a standardized template that enforces data formats to prevent the loss of leading, trailing, or special characters.

 

Maintain the Vendor Master

If the master file in not cleansed at least once a year of all inactive accounts, employees may inadvertently pay an invoice against an inactive account and then pay the second invoice against the correct account. Also, inactive master vendor accounts facilitate fraud. Vendor master files should be reviewed quarterly, at a minimum, to inactivate old vendors not used anymore as well as identify and remove duplicate vendors. Ideally, one person should own the vendor master file. If this is not practical, then a report should be run of all changes made to the master vendor file periodically. This report should be delivered to the manager that owns suppliers to review it. The purpose of this file is two-fold: to prevent employees modifying the file for fraudulent purposes; and to make sure the vendor coding makes business sense.

 

Create and Enforce Data Entry Standards.

Insisting on original invoices used to be a pretty good control against duplicate payments. That is no longer true. Today, many companies send invoices by e-mail. With advances in technology there can be 15 original copies of an invoice. Make sure your processors are not printing them before processing and then inadvertently processing the printed invoice as well as the electronic one. If you have very rigid standards for entering invoice numbers and coding standards this shouldn't cause you problems. But even the best trained staff can incorrectly process a payment. Most systems, including Ariba P2P, will not allow the entry of a duplicate invoice number. Unfortunately, all that is required to pass an invoice is an added blank space, a period, or some other insignificant character to the end of the invoice number and it will force it through. This can be done either inadvertently, or deliberately to get an invoice off their desk. Standard audit reporting on invoices, sorted by invoice number, will allow auditors insight into where an invoice may have been passed through the system.

 

Items that should be considered when establishing data entry standards for entering an invoice number are:

• Are leading zeros entered?

• Are non alpha-numeric characters entered?

• What should be entered if there is no invoice number?

• What format is used to enter dates?

• What should the invoice number be if there is only an account number?

• What should be entered if the invoice number is longer than the allotted space within the field?

 

Many companies are moving to OCR (Optical Character Recognition) software which scans the invoice and pulls off the vendor, invoice number, invoice date and amount. If you are using OCR technology, be sure that your manual data entry standards for entering an invoice are aligned with your OCR technology. For example, if an invoice number is 000482, most OCR solutions will read in all of the digits, i.e. 000482, as the invoice number. If your manual process is not to enter leading zeros then you will entered the invoice as 482; causing a duplicate payment. Invoices without invoice numbers are another source of duplicate payments. A standard process for creating an invoice number where one does not exist should create the same unique number no matter who uses the strategy. For example; Supplier Number plus invoice date creates will create the same number no matter who processes this invoice.

 

***Content for this Tip of the Week was contributed by David L. Brooks II , Ariba Technical Consultant

 

Click here to view the previous posts in this series

Tip of the Week: Procurement - Minimize Duplicate Payments (Part 2)

Tip of the Week: Procurement - Minimize Duplicate Payments (Part 1)

DIY - Do It Yourself

 

There are service providers that offer, for a fee, rule driven data analysis that traps possible duplicate or over payments. These services are priced either as a fixed cost or for a portion of recovered funds. It is claimed, plausibly, that these efforts are successful in recovering funds disbursed in error. However, we do not recommend this approach for several reasons:

  • Transaction analysis based on rules are never 100% effective. Heuristic processes are by their nature iterative; and require time and diligence for the process effectiveness to improve to an acceptable return.
  • Paying a portion of recovered funds does limit the cost of recovery to less than the total funds recovered; but there is often a fixed start-up cost for this service.
  • Capturing funds after the fact ignores the loss of availability of that cash for the period before the disbursement was caught.

 

We believe that the better approach to the problem of duplicate or erroneous remittances is a combination of: proactive data configuration; formal process controls; and reporting created to support continuous process audits. This approach has 4 advantages:

  1. There are virtually no fixed costs to implement
  2. Cost of the additional controls are minimal
  3. Most errors are captured before payments are released
  4. Internal audits add no additional cost to recovery

 

Should you realize that some of your current, or planned, processes are not consistent with the recommendations that follow, it does not mean that you have rampant duplicate payments. It is intended as a checklist to ensure you have done your best to provide the process controls to minimize payment error. And that you have established the necessary reporting for effective and frequent audit of disbursements.

 

Best Practices:


Actively audit for duplicate payments

  • Consolidate data from as many payables sources as possible Before any effective audit can be performed, access to all the relevant data is required. Consolidating data from as many resources as possible to a single reporting system will make audits efficient so that they can be done frequently. Software, such as Ariba Analysis, provides an analytic engine capable of reporting and comparing data across multiple data sources.
  • Create a formal process to audit for duplicate payments If your volume of transactions is large enough, consider establishing an internal audit position that reviews for duplicate payments.
  • Focus the audits on the areas of best opportunity for duplicate payments Auditing should be focused on large dollar invoices and high volume suppliers. When it comes to duplicate payments, not all transactions or suppliers provide similar opportunity for funds recovery. Develop some extra checking routines around large volume or high cost invoices to be completely certain a duplicate payment is not being made.
  • Check T&E sources for possible payments that might have been invoiced.  Occasionally an employee will pay for something with a personal credit card (or cash) and request compensation on their T&E expense reimbursement report. Employees sometimes request reimbursements on the expense report and then submit an invoice for payment. T&E Data sources should be included in any consolidated reporting database.

 

Segregate Suppliers with Differing Payment Methods

It is recommended that supplier processing be segregated by payment type. Suppliers should be set up with a separate post office box, email address, and Fax numbers for those vendors who you pay with credit or purchasing cards. Invoices sent to either location can be checked against credit card statements to ensure payment is made only once. Suppliers who have more than one payment method should have more than one supplier ID; each corresponding to the one of the different payment methods. These suppliers should have different contact information, but should have the same supplier parent for reporting purposes.

 

Consistent Business Processes Per Supplier

The trend is for companies to no longer enter invoices manually. The internet has made it easy for companies to use electronic invoicing solutions and other electronic means of transferring invoices. If a supplier is set up to process invoices via the Ariba Supplier Network (ASN), be sure that all invoices for that supplier go through the ASN. Key data elements, such as the suppliers invoice number, must be unique. The uniqueness of that number is a first line of defense against a duplicate payment when an invoice is sent both manually and electronically. Because of this, duplicate payments will slip through if there is no check for duplicate invoice numbers. Ariba’s P2P application requires that the combination of Supplier ID and Invoice number be unique for this reason.

 

Formalize Procurement & Credit Card Procedures

Credit card companies are pushing organizations to use procurement cards in their purchasing. Historically, company issued procurement cards were reserved for low dollar

items but that is no longer the case. It is not uncommon for a company to require that all purchases under $10,000 be paid through a credit card. As the use of credit cards increases, we have seen a rise in the number of duplicate payments made where the item was paid via a credit card and then mistakenly pay the invoice sent by the supplier. If you are going to use a credit card for a supplier, be sure that every transaction for that supplier is placed on the credit card. Develop reports to determine which suppliers you have purchased items both on card and manual invoice. This report should be reviewed and audited on a monthly basis.

 

Credit card electronic data feeds can be invaluable in capturing credit card payments before an invoice can be paid in error. These feeds can be sent as frequently as nightly; and the Level 2 and 3 charge formats can include invoice numbers. Issuing a purchasing card number should be coupled with the provision that an invoice number is required from the vendor on the credit or purchasing card transaction record. It is also possible to add the Purchasing Order number to the variable data length field in the card transaction feed. It is often not possible to capture these numbers from the supplier; if so then purchasing cards should be limited to low value, less frequent supplier purchases so that the impact of duplicate payments can be lessened.

 

Separate the Purchase Order Processing from Receiving

Enforcing receiving prevents duplicate invoices by intercepting the over payment as an over receipt of goods. It is imperative that whoever makes the payment takes all the steps normally taken by in accounts payable. This means using the same rigid coding standards and distinguishing between the purchase orders (requester) and receiving documents(the receiver).

 

Click here to read Tip of the Week: Procurement - Minimize Duplicate Payments (Part 1)

Click here to read Tip of the Week: Procurement - Minimize Duplicate Payments (Part 3)

As purchasing systems evolve and offer more process flexibility and expanded payment options, it is imperative that procedures be re-engineered to eliminate weaknesses that allow duplicate payments. The extent of the problem of over payment varies across companies and industries. However, it has been estimated that as much as 1% of all corporate remittances are duplicate or inaccurate payments. In the past, bills were paid with one process; upon receiving an invoice, and after validating it against the authorizing document (purchase orders, contract, etc) remittance is sent via a check. This process with fewer possible payment venues was easier to audit for duplicate payments; but no less prone to duplicate payments than modern systems. With all the new payment and invoice delivery options now available, every company needs to be concerned about:

 

• Payments being made twice using two different payment types

• Professionals in numerous departments making payments without a formal process intended to avoid duplicate payments

• Unscrupulous employees or vendors taking advantage of the increased "opportunities" to hide a duplicate payment.

 

Items that should be considered when establishing data entry standards for entering an invoice number are:

 

  • Are leading zeros entered?
  • Are non alpha-numeric characters entered?
  • What should be entered if there is no invoice number?
  • What format is used to enter dates?
  • What should the invoice number be if there is only an account number?
  • What should be entered if the invoice number is longer than the allotted space within the field?

 

Many companies are moving to OCR (Optical Character Recognition) software which scans the invoice and pulls off the vendor, invoice number, invoice date and amount. If you are using OCR technology, be sure that your manual data entry standards for entering an invoice are aligned with your OCR technology. For example, if an invoice number is 000482, most OCR solutions will read in all of the digits, i.e. 000482, as the invoice number. If your manual process is not to enter leading zeros then you will entered the invoice as 482; causing a duplicate payment.

 

Invoices without invoice numbers are another source of duplicate payments. A standard process for creating an invoice number where one does not exist should create the same unique number no matter who uses the strategy. For example; Supplier Number plus invoice date creates will create the same number no matter who processes this invoice.

 

 

 

This has been Part 1 of a multi-part series.  Each Tip of the Week will link to the other parts in this series as they are published.  Be sure to join the Ariba Customer Success Group for more in depth best practice tips.

 

Click her for Tip of the Week:  Procurement - Minimize Duplicate Payments (Part 2)

Click her for Tip of the Week:  Procurement - Minimize Duplicate Payments (Part 3)

More

Ariba LIVE 2012 Resources

HTML

Upcoming Events

Refresh this widget

There are no entries for this feed

Popular Documents

May '11 LinkedIn Group Call

An open discussion with Roy Anderson and Supply & Demand Chain Executive editor Andrew Reese on procurement people, process and technology trends. This was the Strategic Sourcing & Procurement LinkedIn group monthly member call on May 26, 2011.





HTML

Ariba Discovery

Latest Poll

Refresh this widget
What does Contingent Labor mean to you?

Dan AshtonCreated by Dan Ashton on Sep 14, 2010 in Procurement