ESTABLiShiNg AN ENd TO ENd PrOCurE-TO-PAy PrOCESS AUTHOR Ali Johnson, senior Manager COMPANY gap inc.
chAllenge: Gap Inc. store maintenance needed to streamline the labor intensity of its procure-to-pay systems, reducing the amount of human interaction related to invoice management. best PrActice: By leveraging the work order management system and the back-of-house accounting infrastructure (Oracle), Gap Inc. has designed an invoice management system requiring human interaction only on an exception basis. This process allowed Gap Inc. store maintenance to leverage technology to streamline the labor intensity of prior procureto-pay systems. Outlined below are the process steps that make this possible: 1. Work orders are opened for individual service events by location: • The unique work order number is also accepted in Oracle as the unique purchase order number. • Not only does this dual purpose numbering enable cost-per-location tracking but it also auto codes and routes spend to store level P&Ls. 2. Preset guidelines for spend by trade cap the purchase order liability and can only be overridden by a specified value proposal. 3. Specified value proposals must be approved by business partners with pre-approved spend limitations by grade level to ensure big ticket cost control. 4. Gap Inc. internal audit allows IVR to be accepted as proof of service but the call-in must be made from the store phone number. 5. Upon completion, each work order automatically converts to an Oracle purchase order. • The CMMS sweeps all completed work orders nightly and does a mass enablement upload to convert the completed work order number to an active Oracle purchase order. • From work order completion to active purchase order is 48 hours maximum. 6. Once the purchase orders are active, the function allowing vendors to submit invoices via the CMMS attachment is disabled. Instead invoices are auto-generated through the CMMS based on vendor confirmation of billable value. 7. A valid invoice must be equal to or less than the trade limit or match the specified proposal value for that work order. a. U.S. vendor payments are scheduled for electronic wire transfer according to the negotiated pay cycle in the vendor’s Oracle profile (quick pay discounting is allowed). b. International vendors get paid via mailed paper checks. results: Using this procure-to-pay model, Gap Inc. has been able to reduce monthly aging from an average of $3M - $10K per month across 150,000 invoices a year. The productivity improvement in this model not only saves day-to-day operating costs between the vendor’s receivables and the retailer’s payable terms but also reduces accrual liability by minimizing aging invoice floats in the monthly forecast process. VeriFicAtion oF eFFiciency And sAVings cAPtured: Gap Inc. is saving headcount and vendors are delighted with the efficient payment process. A true WIN-WIN!
2012 Best Practices
Table of Contents for the Digital Edition of PRSM 2012 Best Practices