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For Schools: Current Best Practice for Procurement and Accounts Payable

For Schools: Current Best Practice for Procurement and Accounts Payable. Ronald Everett Summer 2007. Myth:. The more paper, the better the paper trail. The Traditional PO Process Can Be Painful…. Paper Intensive / Mountains of Paper Multiple Departments Involved

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For Schools: Current Best Practice for Procurement and Accounts Payable

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  1. For Schools: Current Best Practice for Procurement and Accounts Payable Ronald Everett Summer 2007

  2. Myth: • The more paper, the better the paper trail

  3. The Traditional PO Process Can Be Painful… • Paper Intensive / Mountains of Paper • Multiple Departments Involved • Same Process Regardless of Transaction Value • High Average Per Transaction Cost to School District • High Average Per Transactions Cost to the Vendor • Not Cost-Effective for Small Purchases

  4. What does it actually cost to complete a PO? • From requisition to receiving item? • From requisition to paying for item?

  5. What are the Experts Saying? “The average cost of processing a purchase order manually is between $75 - $200. Automating procurement reduces that cost to between $10 - $40... The Return-On-Investment (ROI) is amazing.” Deloitte Consulting • Accenture • US Bank • Fifth/Third Bank • American Express • Chicago Public Schools - Elgin U-46 - Rockford

  6. Bench Marking Questions • How many non-payroll checks are written each month? • What % are for less than $1,000? • What % are for less than $500?

  7. Real example of reducing paperwork • Fulton County Schools, Georgia • 70,000 Students • 2 cards per building • Reduced PO’s from 60,000 to 30,000

  8. Another example of reducing paperwork • Naperville 203 • 2001 - 9,847 PO’s • 2006 – 4,724 PO’s • Saved 5,123 PO’s 5,123 x $75 = $384,225 in man-hours 5,123 x $2.50 = $12,807 in postage • What can you eliminate? • What can you save?

  9. Why is the Streamlining of Small Purchases Significant? The majority of transactions in most organizations are for relatively small amounts • District 203 – 58% of AP checks are for less than $500 • District 204 – 58% of AP checks are for less than $500 • IOMA article – 60% of case study purchases less than $1, 000

  10. Bench Marking Questions • How many “petty cash” transactions per year? • How many “emergency/reimbursement” checks written per year? • How many “imprest fund” checks written each year?

  11. Could all of these small transactions each month be consolidated into one payment?

  12. Who are the employees creating all of these small purchases?

  13. Key to Consolidating Small Purchases into one payment: • Get p-Cards into the hands of those who are currently making small purchases/ generating PO’s of less than $1,000.

  14. What are Procurement Cards? • They look and operate similar to credit cards • They do not carry a revolving line of credit • Usage and authorization parameters can be reviewed and managed via the internet by district administration

  15. Specific card use parameters can be established for each card • Transaction limits per charge • Monthly limits • Preferred Supplier Restriction • You control what can be purchased, where it can be purchased from and limit amount per transaction

  16. Customized Card design can display: • Card holder name • School District name and number and/or • Tax ID (up to 24 characters)

  17. Advantages of an Association Sponsored Program • Single Contract • Creates a user group/support network • Negotiation clout • Due diligence costs eliminated • Rebates

  18. p-Card Growth - Districts

  19. p-Card Growth – Number of Cards

  20. p-Card Growth – Purchasing Volume

  21. Rebate History • 2003-04 $0 • 2004-05 $46,101.51 • 2005-06 $125,522.01 • 2006-07 $295,899.63 • 2007-08 $??

  22. Customized Card Design • Individual Card • Department Card – No Fraud Coverage • Ghost Card – No Plastic

  23. Billing Cycle Requirements • School District may choose a billing cycle cut-off of the 5th or the 20th • Payment is due at Harris Bank within 21 days of billing cycle cut-off • Penalty for late payment (Prime + 7%) on all transactions in the billing cycle • Penalties can be avoided with pre-planning and monitoring online usage reports

  24. Current Rebate Schedule 5/1/2007 APV 21 Day 14 Day 7 Day Tier 6 $70,000,000+ 1.00% 1.10% 1.20% Tier 5 $50,000,001- .95% 1.05% 1.15% $70,000,000 Tier 4 $30,000,001- .85% .95% 1.05% $50,000,000 Tier 3 $20,000,001- .75% .85% .95% $30,000,000 Tier 2 $10,000,001- .65% .75% .85% $20,000,000 Tier 1 $5,000,001- .55% .65% .75% $10,000,000

  25. Billing and Payment • Monthly Billing Statements • Consolidated Billing Statement (Available online) • Cardmember Report (available online) • Individual Reports • Payment Methods • Electronic Funds Transfer • Automated Clearing House • Check

  26. Why was MasterCard selected? • Superior vision with technology and e-commerce • Fraud Protection insurance • Dedicated group to sign up suppliers • Customized card design displaying the name of card holder, school district and/or tax exempt number

  27. Why was MasterCard selected? (Continued) • Individualized training • Global acceptance at over 35 million locations • Retailers benefit from low transaction charge

  28. Online Capabilities (7-24) • Online Program Management • Submit, approve, and cancel Card accounts • Instant Account Activation • Adjust spending limits/manage Cardmember profiles • View Cardmember charges • Change accounting information • Online Information Services • View/Manage Program Information • Access to Web reporting tools

  29. Vendor Benefits • Reduces vendor transaction costs • Vendor paid by Harris within 48 hours of shipment/pick-up • Reduces the issues of partially filled orders

  30. Benefits of a p-Card Program for Management Easier on Accounts Payable • Submit one monthly payment vs. multiple payments to multiple vendors • Reduction in paperwork • Fraud prevention and protection through the Bank and MasterCard • Detailed reporting available 24 x 7 • Easy online administration and dedicated customer support • Control on spending limits and accepted vendors

  31. How to Get Started • Request information packet from State Affiliate ASBO or click here for printable version • Submit resolution to local board of education for purchasing card participation • Identify local p-Card administrators • Complete application packet – send to Illinois ASBO

  32. Our Sponsors: (Click to visit website) • IPA • IASA • IASB Partner States: • Wisconsin • Indiana • Oregon • Minnesota (PMA) • Washington • Alaska

  33. The Next Step • Order Cards • Training with Harris Bank/BMO • Distribute Cards • Reconcile Bills

  34. Side Benefits • More time on task • Less wasted time • Reduction in the publication of the annual “Statement of Affairs” • Reduction in time/cost of monthly bank statement reconciliation • Better investing/cash management

  35. A Sampling of Major Textbook Companies who accept the p-Card:

  36. Sample of Suppliers who accept the p-Card:

  37. For more information, word documents and other tools, or to download all available files, please go to www.iasbo.org.

  38. Kim Lamansky815.753.9083 (tel)815.753.9367 (fax)lamansky@niu.edu

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