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Accounts Payable Black Belt Project

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  • #23566

    Long
    Member

    I am currently working on my black belt project involving improving the accounts payables at my company. The current practise is to pay freight companies with net 7 day terms. The problem we run into here is that invoices take on average 7-10 days to be keyed into the shared services system; this includes mail time, waiting and scanning, which means virtually all freight payments are late.
    The end result is that our on-time payment metric is skewed by these payments. Does anyone know if the norm is to measure on-time payments from the date on the invoice?
    It’s hard to control the mail and the shared service workload. Is it truly industry practise to expect freight payments to large companies in 7 days from when the invoice is printed? I could believe this if invoices were transmitted electronically, but they’re not!

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    #56246

    John M
    Participant

    Roger,
     I think it is time to challenge the specification. I am currently running a project on invoicing to our customers and I am opting to send E Invoices to my customers to reduce errors and mail times. The focus for me is to decrease payment cycle times to increase cash flow.
    My advice enter into dialogue with the freight suppliers instead of the monologue situation where a spec is defined. Without dialogue and improvement on both sides the spec could never be achieved.
    I measure from invoice cut to payment and do a capability analysis against thel target. A favourite i hav heard in the past is we have 30 day terms and on average we get payment  in 31 Days.
    Which I Repy you have less than a fifety percent yield then and what is the standard deviation?
    Hope this helps
    All The Best
    John M

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    #56251

    Andreas Kleinert
    Participant

    Hi Roger:You say that your keying-in process has a cyle time of 7-10 days.I would recommend to make a process analysis identifying which process steps add value. Identify the percentage of steps and time of the total that adds value. You can use that as a base for improving your payable process without needing to discuss whether the specs are okay.Andy

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