First, Analyze The Processes

Dec. 21, 2004
Engineering firm weeds out unnecessary tasks before applying technology.

When Dames & Moore Group (D&M), a Los Angeles-based engineering firm, was acquired by URS Corp., the company wanted to consolidate more than half a dozen accounting operations spread around the country. Mark Snell, formerly CFO at the engineering company and now URS's director of finance, knew the company would benefit from a new accounting system, but he didn't want to automate old procedures and ways of doing things. "We did a bottom-up analysis of everything we did," Snell says. "We tried to streamline the handling of paper and the way we deposit checks, and how invoices are handled." The process analysis revealed a number of areas where employees were performing tasks in unnecessarily complex ways, costing both time and money. "Due to both technology and process improvements, we made some functions easier to do," Snell says. As a result, D&M was able to reduce its accounts-payable staff from 45 to 10. "We eliminated a lot of manual work with technology, and we eliminated various steps in our processes, such as how we handle a check or an invoice." Basic workflow technology helped. "We used to circulate all the invoices around for approval," Snell says. The company replaced that procedure with a new one that routes electronic images. The same imaging technology also saves time when customers inquire about a bill. Accounting staff can immediately call up the image and respond instantly -- by e-mail, if necessary -- while talking to the customer on the phone. One of the biggest process-related gains in accounts payable was derived from instituting a new question-and-answer procedure for employees to follow at the beginning -- even before an accounts-payable clerk began work on an invoice, Snell says. "The idea is to make sure that all the information is there that is needed to complete the transaction," he says. For instance, an employee looks to see if there is a job the invoice is being charged to and whether a project manager is listed -- two things, among others, that the company requires before a bill can be approved for payment. "These are things a person checks off on a checklist on the front of every invoice," Snell explains. If the invoice lacks either of these items, it gets routed back to operations for approval or coding. Sometimes this means an employee must add a missing job number or some special payment instructions. In the past, invoices that lacked complete data were put on hold and held in a suspense account. "We were actually creating a lot of work for ourselves," Snell says. "You'd be surprised how many companies get locked into a process." Another way D&M was able to achieve gains was by benchmarking its own processes and tracking the results. "In many cases, for most process improvements, you have no idea of the gains you've made unless you track the results," he says. The company began tracking how many invoices each accounts-payable clerk processed per day. It did the same for scanners, billers, and other positions. Error rates were monitored as well. "We were able to create benchmarks for all these processes," Snell says. For instance, D&M found that its top-performing accounts-payable clerks were processing twice as many invoices as those at the bottom. "We moved them up to the midpoint" on the performance scale, Snell says. The process improvement effort wasn't achieved without upheaval, especially among staff. At the company's consolidated accounting operation in Austin, where payables and all back-office accounting functions were centralized, employee turnover ran at 35% per month. "We were just trying to get the right people in place," Snell says.

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