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PayStream Advisors delivers unbiased, third-party market trend information, assessments of financial automation technology, and innovative ideas to business leaders in healthcare, consumer billing, finance and treasury, accounts receivable and accounts payable.

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Case Study: Orange County Public Schools | Accounts Payable Process Analysis

Company: Orange County Public Schools

Implementation: PayStream’s Payment Process Analysis™

Industry: Education

Company size: 12th largest of 16,000 school districts in the United States

“Exceptions like missing GR’s are killing our productivity.”

-- AP Department

The problem

• Explosive growth in student population
• Entirely manual document management system
• Approval process inconsistent with current leading practices
• Limited visibility with current ERP deployment
• Missing available discounts
• Invoicing process costs 60% above industry average
• Poor communication between departments
• Poorly trained AP staff

The solution

• Conduct an automation assessment of accounts payable process
• Document metrics with PayStream’s methodology and benchmarking data
• Introduce document imaging technology to the system
• Exploit PayStream’s library of best practices across the industries
• Expand electronic payment options (P-Card, EFT & EDI)
• Apply workflow to enhance approval process and communication
• Specialize AP tasks and training

The benefits

• Scalable AP department to accommodate explosive growth
• Imaged documents only mouse-clicks away from all departments
• Invoicing costs in line with industry average
• Reduce exception handling commitment by 50%
• Efficient approval process from workflow
• Productivity gains from AP training and specialization
• Improve financials from discounts and released working capital

A Picture is Worth a Thousand Words: Improving Approval Processes through Imaging, Workflow and Training

The Orange County Public School district, the 12th largest school district in the nation, is growing by leaps and bounds. The challenge was to accommodate the districts explosive growth while reengineering its existing, labor intensive, accounting processes.

A PayStream Advisors team visited the Orange County Public School (OCPS) headquarters to gather information and assess OCPS’s options. PayStream’s Payment Process AnalysisTM revealed promising opportunities for significant process savings and improvement. PayStream Advisors leveraged its own research, library of best practices, benchmarking data and proprietary assessment methodology before making recommendations in the form of an implementation road map.

To their credit, OCPS managers and support staff did not hide or sugarcoat their problems; quite the contrary. They recognized that parts of their process were broken, antiquated or missing, and were willing, even eager to “go to school” on PayStream’s advice. The positive elements OCPS had in place included a centralized receipt process and an efficient AP department with reasonable controls to prevent fraud.

The problems to address included poor communication between departments, a manual document management system, a lack of workflow automation and an overly active, time consuming exceptions handling process.

“If only we had access to the original invoice we could save a lot of time approving invoices.” - Bookkeeper

While a centralized receipt process has its merits, in the OCPS’s case, it also created the school districts biggest headache - lack of visibility throughout the AP invoice receipt, approval, and payment process. For example, approvers/end users could not see an invoice. In fact the AP department was forbidden to fax or otherwise send an invoice to other departments. End users reported frustration with the email reminder process in place as they frequently did not have all the information they needed. Lack of invoice visibility meant delays in posting of Goods Receipt (GR’s) and slowed the exception management process.

“I spend almost half my day on emails and phone calls trying to reconcile differences in the invoice without having access to the original invoice.” – Maintenance Dept. Manager

PayStream Advisors recognized the lack of imaging and workflow as the salient deficiencies and recommended these AP automations to facilitate the sharing of invoice images across the district and to accelerate the invoice processing and approval cycle.

Surprisingly, OCPS’s per invoice hard cost was actually $0.29 below the benchmark group average. However, this positive variance was due, at least in part, to well-below average labor costs and a work distribution that skewed the hard and soft cost.

The total cost to process an invoice was $7.80 each. PayStream determined 34 percent of the invoice costs were generated by the AP department. The remaining 66 percent was attributable to the lack of visibility experienced by end users in the various other departments. PayStream estimated invoice processing costs at OCPS were about 60 percent higher than peer group medium-sized AP organizations and demonstrated how total costs could be reduced to $5.33 per invoice.

Another money-saving measure AP automation could ameliorate was discounts, or in the case of OCPS, a lack thereof. AP was taking advantage of a few early payment discounts on large book orders but was missing out on numerous other small opportunities.

“Our suppliers are willing to take discounts, but the system doesn’t track terms.” - Warehouse Dept.

PayStream concluded that scanned documents (individually or in large batches) that are indexed and archived will provide easy access to all parties concerned. Invoices will be found based on any number of elements: Vendor Name, PO Number, Invoice Number, Date, and SAP Document Number (i.e. Invoice Number). A properly designed and implemented imaging and workflow system will facilitate quick access to invoices and comprehensive discount strategies. An AP automation implementation will also dramatically reduce processing costs and accelerate the exception approval process. PayStream Advisors Payment Process AnalysisTM identified annual savings of over $545 thousand for OCPS and a ROI of 27 percent in two years.

Want to Learn More? See PayStream's extensive library of Accounts Payable Automation Research.

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