Managing accounts payable is important to maintain the integrity of the purchasing process. The costs of missing discounts, paying too early without discounts, duplicating payments or paying before equipment is accepted can be costly to your organization if it’s not monitored. The process will work most effectively when a collaborative environment exists between the purchasing and accounts payable (AP) departments. I have heard many stories, and can tell a few of my own, about the friction between AP and the purchasing department in various hospitals.
The challenges stem from a couple of factors. First, an AP staff that has difficulty deciphering the terms, item codes or descriptions on a purchase order are immediately at a disadvantage. They will have difficulties handling a match process, thus creating an opportunity for error.
Second, when these two departments are separated physically by more than one wall, they may as well be 10 miles apart. Communication is a challenge, and fixes to the underlying problems may be slow or nonexistent.
With today’s robust information systems on both the buyers’ and sellers’ sides, there are numerous transactions that should be clean and automated from the requisition through the payables match. Items such as routine inventory purchases from a prime vendor handled via EDI ordering and invoicing should be the simplest. The more automation that can be introduced into the picture, the less opportunity for error, and the more time staff will have to address other challenges.
The most challenging invoices that AP will have to deal with include capital equipment, construction and a variety of services. And when the AP staff has an issue, there is a likelihood that the purchasing staff will be included as well.
This is the rework trap that most of us do not want to fall into. It’s time consuming, costly and keeps progress at a crawl.
One answer to the communication challenge between departments is to force integration. Put at least one payables clerk at a desk inside the purchasing department, to become part of the team. We made this move about four years ago when we changed our materials management information system, and an interesting thing happened.
The AP clerk became engaged in the purchasing process, and the purchasing staff began to understand the challenges that AP faced due to purchasing’s actions. Everyone was learning more about the entire process than they had ever known before.
The AP clerk who sits in the purchasing department is rotated about every 18 months. We are now on the third person to have rotated through the purchasing department with very positive results.
Credit cards and procurement cards can be another step to improving the relationship, efficiency and effectiveness in both AP and purchasing by reducing paperwork. Specific policies and procedures should be in place to prevent rogue buying.
Using credit cards for things such as seminar registrations, Internet purchases, association dues and other miscellaneous activity, decreases the AP burden as well. Using file downloads from the credit card company and uploading into the AP system is a basic process for reducing transaction touches. Using file transfer protocol (FTP) or interfaces can take this process to the next level as well.
Using vehicle fleet cards for your fuel purchases is another step to streamline activity if you have leased or owned vehicles in your organization, perhaps for courier services or executive use of those vehicles.
There should be a couple of programs available in your area that allow for discounts, elimination of sales tax (if exempt), and tracking of fuel by user and vehicle. In our health system, we use a basic spreadsheet in conjunction with the fuel card invoice process to simplify the payable process.
These are not difficult things to implement, and can make a big difference. Breaking down the barriers to learning sometimes require simple steps such as getting people in the same room who ultimately have a big impact on one another. It’s amazing what we can accomplish when we knock down the “can’t do” perception and turn it into a “how can we” model of continuous improvement.
Jeff Wagner is an assistant vice president with MidMichigan Health, Midland, Mich.
This article first appeared in the November 2007 issue of Materials Management in Health Care.
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