Introduction. Table of Contents

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2 Introduction To stay competitive, you know how important it is to find new ways to streamline and save on your company s operations. Learning how leading companies handle commercial payments can give you deeper insights into where and how you can improve. Help you understand how to run your Procure-to-Pay processes more efficiently. Enhance visibility into corporate spend. Gain better control and compliance. And ultimately, help enable you to add more profit to your bottom line. Visa commissioned Deloitte Consulting to conduct 90 in-depth interviews in with more than 60 global/multinational, mid-size and large corporations as well as federal and local government agencies across the world. In 2010, Visa commissioned Deloitte Consulting to update each of the following 28 Travel and Corporate Card Best Practices from the comprehensive study to include current trends, updated case studies, and additional key findings. See the section entitled Study Methodology for additional detail. The Visa Global Procure-to-Pay and Commercial Card Best Practices Study describes how these organizations implement and optimize their Procure-to-Pay processes and commercial card programs. The study gives you access to best practices for a variety of topics: Maximizing the benefits of purchasing and corporate card programs. Streamlining travel and entertainment management. Taking advantage of the latest innovative best practices. And automating the entire Procure-to-Pay process. Each best practice is divided into three useful sections a recommendation overview, a benefits outline and steps for implementation so you can quickly find the information you need. For more information on the Visa Global Procure-to-Pay and Commercial Card Best Practices Study, contact your commercial banker. Table of Contents Reduce Invoices with Evaluated Receipt Settlement (ERS) Study Methodology Note: Survey results, research and practice recommendations are intended for informational purposes only and should not be relied upon for marketing, legal, technical, tax, financial or other advice. When implementing any new strategy or practice, you should consult with your legal counsel to determine what laws and regulations may apply to your specific circumstances. Visa is not responsible for your use of the information, including errors of any kind, or any assumptions or conclusions you might draw from its use. Much of the information contained in this document applies internationally, but a certain amount of information applies only to certain countries or regions. Although Visa tries to mark all country- and region-specific information with a country indication, it does not warrant or represent that all information without indication applies internationally. You should check the applicability of any information in this document to you or your organization.

3 Reduce Invoices with Evaluated Receipt Settlement (ERS) Evaluated Receipt Settlement (ERS) is a business process used by best practice organizations to eliminate the need for an invoice, which can result in a more efficient, streamlined payment process. ERS allows organizations to conduct a two-way match between the Purchase Order and the goods or services receipt to trigger the approval for payment. ERS streamlines the payment process as follows: ERS helps eliminate duplicate payments, increase the amount of discounts taken, improve data accuracy, and, reduce Accounts Payable processing costs. One large U.S. manufacturer established a goal of increasing automation in its payment process. The company utilized ERS for its large, direct materials suppliers and used the purchasing card to pay for its indirect spend payments. As a result of both efforts, the company achieved 67 percent automation of its payment process. Companies implementing ERS often begin with a pilot program with select suppliers. The pilot program allows companies to work closely with participating suppliers and internal employees to identify potential implementation and process issues related to ERS. For pilot programs and initial ERS enrollment, best practice companies typically select suppliers with current pricing agreements in place who provide direct or indirect materials as the receipt of goods is a more straight-forward process than the receipt of services. Companies often communicate one-on-one with their suppliers to enroll them in their ERS implementation. They ensure that suppliers understand that invoices must no longer be sent as the goods receipt will trigger payment and that goods not matching the ERS Purchase Order will be returned. Some companies will use ERS for services as well; however, this requires that the system be able to record the receipt of the service. A global energy company recently completed an ERS expansion project, the primary driver for which was the elimination of paper invoices. As a result of the expansion project, ERS payments accounted for 20 percent of the company s total transactions. The company focused on implementing ERS with strategic materials and service providers. The first phase of the project set up 1 REDUCE INVOICES WITH EVALUATED RECEIPT SETTLEMENT (ERS)

4 material suppliers on ERS, the second phase was focused on service providers. In order to implement ERS with service providers, the company developed a separate system that created a pro forma service entry sheet to the client group to approve. In order for ERS to work effectively, Procurement and Accounts Payable must clearly communicate the new payment process to employees. Buyers must enter all ERS-related Purchase Orders as ERS Purchase Orders in the procurement system, and receiving employees need to ensure that they perform the necessary receipt validation and quality/quantity review of the goods / services before logging acknowledgement of the receipt since logging the receipt of the good/service triggers payment to the supplier. "If you don t do anything else to automate your Accounts Payable process, do ERS." U.S. Aerospace and Defense Company Options for Best Practice Adoption Companies have several options in deciding upon an ERS adoption. Option I Option II Option III Options for Adoption Use ERS for select Expand use of ERS for Implement ERS for direct material direct and indirect direct and indirect suppliers goods/materials materials as well as services Benefits Allows for adoption Allows for adoption Maximizes savings of ERS to those areas of ERS to those areas from automation by which will make the which account for a expanding use of highest impact large portion of total ERS for services spend Key Considerations Excluding indirect Excluding services Requires the ability materials and limits the level of to automatically services limits the automation of the confirm receipt of level of automation payment process the service of the payment process Benefits Best practice companies use ERS to automate the payment process which not only helps reduce the manual processing of invoices but it also provides increased control over suppliers. 2 REDUCE INVOICES WITH EVALUATED RECEIPT SETTLEMENT (ERS)

5 Category Control and Compliance Benefit Obtained The payment is triggered only upon the acknowledgement of the receipt of goods which minimizes payment errors. The elimination of invoices also reduces the risk of duplicate payments. Cost Savings and Process Efficiency Not requiring an invoice helps reduce the costs associated with manual invoice data entry and rework due to errors in the manual coding process. In addition, the pay on receipt process helps reduce the payment time period, allowing companies to take advantage of early payment discounts. Implementation Steps Best practice companies can follow the steps below to implement an Evaluated Receipt Settlement process. # Description of Action Step 1 Verify that current technology (e.g., ERP system) supports ERS 2 Determine the supplier and/or spend categories appropriate for ERS 3 Identify receipt process for ERS spend categories 4 Document the ERS procedures by spend type 5 Inform the impacted suppliers that they will no longer need to send in paper invoices and that all payments will be made in accordance with terms 6 Communicate the process to the buyer; goods / services must be rejected if there are discrepancies with the Purchase Order terms 3 REDUCE INVOICES WITH EVALUATED RECEIPT SETTLEMENT (ERS)

6 Study Methodology The objective of the Visa Procure-to-Pay and Commercial Card Best Practices Study was to better understand the changes in the segment and to gain a comprehensive understanding of best practices across the Procure-to-Pay process and within the commercial card program. Visa commissioned Deloitte Consulting to conduct 90 in-depth interviews in the summer of 2007 with more than 60 global/multinational, mid-size and large corporations as well as federal and local government agencies across the world. In 2010, Visa commissioned Deloitte Consulting to update each of the following 28 Travel and Corporate Card Best Practices from the comprehensive study to include current trends, updated case studies, and additional key findings. The evaluation of the Procure-to-Pay process included sourcing, order placement, payment and settlement, reconciliation, control and audit, and reporting activities. For the commercial card management process, the assessment focused on practices related to the purchasing and corporate card program strategy, management, and reporting. Interviewees included Regional Controllers, Chief Procurement Officers, Directors of Strategic Sourcing, Procurement Managers, Accounts Payable Managers, Global/Regional/Local Commercial Card Program Managers and Travel Managers. Study participants had a range of commercial card programs in place including purchasing card, corporate card and commercial one card programs with each of the top three card providers: Visa, MasterCard and/or American Express. 4 STUDY METHODOLOGY