MANAGEMENT REPORTING MANAGEMENT REPORTING

4.  Accounts payable management reporting: The accounts payable director or manager has the responsibility of keeping accurate information about balances due, due dates,and available discounts and should be able to track and take advantage of terms and discounts, predict cash requirements, and monitor payments so that they are made only once.

4.1. Accounts payable reporting: The accounts payable director or manager should have the following reports available to make sound cash management decisions about which invoices to pay and when to schedule the disbursement. It’s important to take advantage of available cash discounts (according to corporate policy) and be cognizant of invoice aging periods and monthly and quarterly cut-off dates. The following list of reports provides the tools to assist with managing the accounts payable process.

  • Aged trial balance report
  • Accounts payable analysis report
  • Cash flow report
  • Check register
  • Miscellaneous debits journal
  • Open invoice report
  • “Blocked” or “on hold” invoice report
  • Payment history reports (by vendor, business units, subsidiaries)
  • Purchase analysis report
  • Purchases journal
  • Outstanding balances by vendor
  • Vendor activity report
  • Vendor analysis report
  • Vendor detail history report
  • Vendor purchase history report
  • Inactive vendors
  • Vendors with the same address
  • Paid credits
  • Open credit balances
  • 1099 reporting
  • Withholding reporting (VAT, freight, sales and use tax)
  • P-card reporting

4.2. Accounts payable metrics: The accounts payable director or manager should exercise caution when implementing a metrics program. A metrics program must be easy tormenting and update, and reporting should be seamless. The accounts payable professional should have knowledge of key metrics such as:

Days payable outstanding. The (DPO)metric calculates the total time it takes a business to pay invoices. The DPO is calculated by taking the accounts payable divided by the cost of sales and then multiplying that number by the total number of days.

Days Payable Outstanding Formula:

DPO= AP Balance (at a point in time) / Average Daily Purchases

Average DPO= Average AP Balance (for (X) period of time, i.e. 1 year) / Average Daily Purchase (for (X) period of time, i.e. 1 year)

Cost per invoice. Thiscan be a difficult metric to capture because many organizations capture the hard costs to send an invoice such as materials and postage and some accounts payable labor costs, but tend to ignore labor costs allocated to the accounts payable process such as IT, facilities, and other overhead costs. Cost per invoice is calculated by determining the total cost of the accounts payable process and dividing by the total number of invoices processed for the period.

Use of a standard formula will allow comparison across entities:

Include the following costs for the time period measured:
 

  1. Direct Labor Cost associated with Process Being Measured (could be invoice, non-PO invoice, employee expense report, EDI invoice).
  2. Plus: Benefit Markup (usually a percentage that can be provided by Payroll department).
  3. Plus: Occupancy Cost Markup (actual if known or a percent of direct labor determined by cost of comparable space).
  4. Plus: Systems and/or IT Support Markup (actual if known or a percent of direct labor).
  5. Divide the sum of the costs by the number of transactions processed for the time period measured.
  6. Disclose types of transactions included/excluded and costs included/excluding if benchmarking.
  7. Measure at as low a level as possible (can always combine transaction types for rolled up results).

· Invoice-related.

  • Number carried-over from previous month
  • Number received as mail
  • Number received as paperless transactions
  • Number processed per month
  • Number on hand at month end
  • Average processed per day
  • Number processed in previous year
  • Percent of change from previous fiscal year

· Overhead and labor.

  • Managers and administrators
  • Regular associates
  • Part-time associates
  • Contract associates
  • Full-time equivalents
  • Open positions
  • Overtime hours paid
  • Sick pay
  • Vacation pay
  • Business days

· Disbursements.

  • Paper checks
  • Wires
  • ACH transactions
  • Debit blocks
  • Positive pay/payee flags
  • Frequency of payments
  • Emergency/manual payments

· Vendor master file.

  • Number of active vendors
  • Inquiries -- voice, e-mail, Web, internal/external
  • Number of new vendors
  • Re-activated vendors
  • De-activated vendors
  • Purged vendors
  • Merged vendors
  • Electronic invoice trading partners
  • Review of vendor master quarterly, annually
  • Comparison of vendor master with employee file quarterly, annually

· Internal controls.

  • Number of controls, reviewed quarterly
  • Percentage of control deficiencies per quarter
  • Account reconciliation issues, identified per quarter
  • Outstanding variances
  • Clearing account issues (GRIR)
  • Disclosure items, identified per quarter
  • System access issues and segregation of duties exceptions
  • Delegation of authority overrides
  • Outstanding debit balances
  • Duplicate erroneous payments
  • Accounting and tax accrual errors
  • Vendor risk management impact items