Financial Tools: Automating Accounting

May 18, 2006
For manufacturers, the devil lies in the exceptions.

Except for making products that keep customers happy, there are few processes in manufacturing that are more important than accounts receivable and accounts payable.

Making sure customers pay on time and, in turn, making sure vendors and suppliers get paid, are among the most critical functions of any company. Surprisingly, while accounting management software has been around for a couple of decades, many companies are still working to more fully automate, as well as fine-tune, these processes.

Payables can be especially time-consuming. There are as many different formats for invoices out there as there are models and colors of automobiles. What's more, some vendors submit invoices electronically, while some do so via facsimile machine, and others use the Postal Service.

Document capture and imaging systems can help. For instance, many companies use PC-based scanning systems from Kofax Image Products. The Irvine, Calif., company offers systems that can accept a variety of invoice formats via facsimile and transform them into digital images for integration into accounting systems.

"The payback is very dramatic for these systems, especially for companies that are manually entering this information," says Buzz Adams, president of Peak-Value Consulting, a consulting firm in Pasadena, Calif. "If they have a high volume of invoices, they can get giant increases in productivity."

Some manufacturers are trying to make the shift from paper to electronic accounting. For example, Sealing Devices, a manufacturer of seals and gaskets is using Oracle Corp.'s E-Business Suite of financial applications, including accounts payable and accounts receivable.

"On the receivables side, we are trying to automate our outgoing invoices, and we want to get all our receipts electronically," says Michael Clayback, director of information technology at the Lancaster, N.Y., manufacturer, which has annual sales of $35 million.

"Our focus is on eliminating the exceptions."

One way Sealing Devices is trying to encourage its customers to pay electronically is by sending them their invoices electronically.

"When we ship to a customer, the auto-invoice function in the software generates the invoice from the shipping transaction." Despite this effort, some of the seal manufacturer's 12,000 customers still pay with paper checks.

The Oracle software package includes functionality for identifying and tracking late payers. "The software tracks customer correspondence and follow-up calls," he says. "We also can filter these customers based on whether we have a collection agent involved and by dollar value."

Sealing Devices' next advance in this area will be to begin using Oracle's "I-receivables" module, which enables customers to respond electronically over the Web to either schedule a payment or dispute a payment.

On the payables side, Sealing Devices manually processes invoices. "One reason we are not trying to automate the invoices is that we don't have a lot of control over the formats."

Sealing Devices' electronic transactions for both payables and receivables are up from 6,200 per month in 2002 to 7,500 per month last year. "The increase in electronic transaction volume is now dependent on our suppliers' and customers' willingness to adopt this form of payment," says Clayback. "It's no longer a technology issue."

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