Create a free Manufacturing.net account to continue

Transforming The Finance Department With An Optimized Maturity Model

Transitioning to an optimized maturity model with touchless processing to speed invoices to approval has not only reduced the period of time it takes to post an invoice for some companies, but it has allowed companies to capture previously unobtainable early pay discounts.

Take a step back and consider your organization’s finance department for a moment. Is it a paper-based, manually driven process prone to errors? Does it feature some automation, but still require loads of time on exception handling? Global Process Owners (GPOs) are expected to ensure the company gets paid, and to pay the company’s bills on time. The sophistication with which this is completed varies wildly from organization to organization. However, in prior years, one thing was constant: generating revenue typically was not part of the equation for this group.

At Bourns, Inc., a global manufacturer of electrical components for the automotive, industrial, consumer products, and communication industries, revenue generation become an expectation as recently as 2012. Bourns’ U.S. entity processed about 100,000 invoices per year for two of its manufacturing plants. Its other nine international manufacturing plants each handled their own AP duties in a decentralized structure. The process, containing a mix of PO and non-PO based invoices, placed a heavy emphasis on procuring raw materials, and also needed to account for freight allocation, and other elements unique to manufacturing.

The inefficiencies were striking — it was labor intensive, and the amount of paper being pushed through required continual hands-on attention. Upon this realization, Bourns’ Chief Financial Officer knew there had to be a better way. Seeking efficiencies, he directed the Riverside, CA plant to begin processing at least 60 percent of all invoices “touchless” and sought to deploy an optimized process maturity model that would maximize present and future effectiveness.

Defining Optimized Process Maturity

Organizations can typically be classified in one of four stages when evaluating their own level of process maturity: traditional, electronic, automated and optimized. As you can imagine, they range from the least sophisticated, in which an outdated, old school style of handling documents is deployed, to a highly sophisticated model that combines technology with long-term process change.

An optimized process maturity model mixes technology with process improvement to improve speed, quality, and effectiveness. It’s not simply about automating existing processes — but more importantly, about surrounding automation with processes and tools that provide better global oversight and control, have some flexibility to meet local demands and most importantly — ensure continual improvement.

Reaching an optimized maturity model may not happen in a single leap. Many times it is best to achieve in incremental steps to avoid operational disruption, using each milestone as an opportunity to demonstrate value and showcase improvements to key stakeholders. At Bourns, the decision was made to roll out the transition to its U.S. entity first, before taking the initiative world-wide.

Process Maturity in Action

At Bourns, an early step in the process was to automate and streamline processes wherever possible. There was still a fair amount of manual data entry, which was slow and prone to errors. Optical character recognition (OCR) was introduced to capture incoming paper invoices so the invoices were instantly visible in the company’s system of record, enabling a greater degree of process control. Internal payment requests generating paper were also standardized and digitized.

Going a step beyond automation, touchless processing was also implemented by deploying a three-way validation system within the system that used the purchase order, invoice and goods receipt. If all three documents matched, the payment was posted without AP intervention.

Invoices that did not come with a purchase order, such as utility bills, were processed touchless by intelligently matching utility providers to pre-defined account and approver assignments. Configurable business rules became a powerful tool to transform existing, time-consuming processes for freight allocations, and transport testing while avoiding unnecessary, bolt-on solutions. For any exceptions that popped up for an invoice, a simple email was sent to the appropriate requisitioner to resolve the issue, often by-passing the accounts payable team altogether.

Many organizations already deploy mobile applications, but those with an optimized maturity model allow mobile to permeate all aspects of the business, from approvals, to tracking and reporting, and everything in between. Self-service portals that empower vendors to view and submit invoices and payments are also a key component of a successful process.

Most importantly, an optimized process maturity model resets value expectations for the AP team. Before the project, contributions were limited because expectations were low. Employees were relegated to basic service tasks such as filing and data entry. They were used to handling 100 percent of the invoices and it took time to help them understand that the vast majority of this work should now auto-post without AP intervention. This was not an overnight change, and it required meeting with employees each week to discuss why certain invoices did not auto-post and how they could auto-post in the future.

The Big Payoff

Transitioning to an optimized maturity model with touchless processing to speed invoices to approval has not only reduced the period of time it takes to post an invoice at Bourns, but it has allowed the company to capture previously unobtainable early pay discounts.

Bourns reached its goal of 60 percent touchless in almost exactly one year. Now, after several years of seeking out continuous improvements, that number is closer to 85 percent. This has allowed Bourns’ finance department to be more aligned with the company’s business objectives and actually generate revenue like other groups.

Prior to the project, Bourns was missing out on approximately $7,000 in early pay discounts per month at a single plant. Today, it is rare for any early payment discounts to be missed. Multiply that across multiple locations and it has a big impact on the company’s cash flow and bottom line.

Marie Bourns is responsible for business process improvements within the supply chain at Bourns, Inc.  Brian Shannon is Principal Business Process Management Strategist for Dolphin Enterprise Solutions Corporation.