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Digg It - 9 Strategies for Writing Accounts Payable Procedures
The Cash to Cash Cycle
Part Four of Series
Next: Complete Cash to Cash Cycle
The white flag is just a nose away…toward the Million dollar prize in cash savings for your business…
So far, in Inventory and Accounts Receivable, we've found $250,000 each in cash savings. Then we found another 250K in Sales and Marketi
Part Four of Series
Next: Complete Cash to Cash Cycle
The white flag is just a nose away…toward the Million dollar prize in cash savings for your business…
So far, in Inventory and Accounts Receivable, we've found $250,000 each in cash savings. Then we found another 250K in Sales and Marketi
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
ng. And so, now, Accounts Payable is the final process within the Cash to cash Cycle - and also the final $250,000.
The cash cycle is undoubtedly the single most important process to optimize for any business – from when you spend money to when you get money.
Circling the Cash to Cash Cycle
So let’s tie this bac
The cash cycle is undoubtedly the single most important process to optimize for any business – from when you spend money to when you get money.
Circling the Cash to Cash Cycle
So let’s tie this bac
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
to accounts payable - the event that pays for the liability incurred by purchasing, which is for inventory required by manufacturing to meet demand. Sales generate this demand that creates the accounts receivables, which is turned into cash. And now we have come full circle and completed the discussion on the cash to ca
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
h cycle.
Increasing the Velocity of Accounts Payable Processes
Your accounts payable is a bit different than the other processes we have examined so far. The first three processes we looked at represented processes where the focus was on reducing the size of assets (inventory or accounts receivable) or expenses (m
Increasing the Velocity of Accounts Payable Processes
Your accounts payable is a bit different than the other processes we have examined so far. The first three processes we looked at represented processes where the focus was on reducing the size of assets (inventory or accounts receivable) or expenses (m
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
rketing) and increasing the velocity or cycle time. But in accounts payable our focus is on increasing the size of the asset, while maintaining a solid credit rating - and increasing the velocity of the process.
Now let’s look at how to find $250,000 in accounts payable savings. If your organization has $500,000 in acco
Now let’s look at how to find $250,000 in accounts payable savings. If your organization has $500,000 in acco
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
nts payable each month, then STOP! We can find $250,000 in savings right here. Where, you ask? Increasing payables by 25% will produce $125,000 in cash plus $125,000 from automating tasks, taking more discounts, and managing the process better.
Service Business Procedures Case Study
An organization with $600,000
Service Business Procedures Case Study
An organization with $600,000
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
in monthly payables needed assistance. We examined their payables process to understand and quantify workflow, paper processing and credit issues. Then we designed and implemented a process to increase their use of payables and discounts, improve their payables cycle efficiency, and tie it to their purchasing and receiva
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
le cycles. We then reinvested $50,000 back into an Enterprise Resource Planning (ERP) program to automate some of the processes that weren’t automated already.
The metrics we developed reduced their purchasing & payables expenses by 25% and increased their efficiency from 50% to 75% within 2 months of implementing the ne
The metrics we developed reduced their purchasing & payables expenses by 25% and increased their efficiency from 50% to 75% within 2 months of implementing the ne
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
procedures. With these new processes and reports, the company now tracks payables cycle efficiency and average days payables, rather than just bills paid on time or outstanding balance, as the measure of their payables effectiveness. The result: an extra $300,000 in cash plus a 50% increase in process capability (capacit
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
).
But how?
Methods to Design Your News Accounts Payable and Accounting Procedures
• Eliminate Paper. The single biggest cost for any purchasing and payables department is paper, including: purchase orders, purchase order follow-up, small-dollar purchases, delivery tracking & receipts, and vendor payments. Utiliz
But how?
Methods to Design Your News Accounts Payable and Accounting Procedures
• Eliminate Paper. The single biggest cost for any purchasing and payables department is paper, including: purchase orders, purchase order follow-up, small-dollar purchases, delivery tracking & receipts, and vendor payments. Utiliz
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
ng paperless invoices, Web-based supplier self-servicing, centralized vendor files, automated workflows for electronic or imaged invoices (see ERP below), and payment methods, such as business credit cards, Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), can reduce paper handling costs by as much as
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
0%.
• Integrate ERP Systems. Enterprise Resource Planning (ERP) automates the purchasing and payables functions, which allows a company to get more work done with fewer personnel. Also, electronic invoice matching applications save time in retrieving paperwork. It is estimated that an ERP system can annually save an or
• Integrate ERP Systems. Enterprise Resource Planning (ERP) automates the purchasing and payables functions, which allows a company to get more work done with fewer personnel. Also, electronic invoice matching applications save time in retrieving paperwork. It is estimated that an ERP system can annually save an or
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
anization $300 per million in sales.
• Increase Payment Terms. Negotiate payment terms based on receipt of goods or the invoice. This can add one week or more to your terms, which can be 25% of 30 day terms. Use EFT for just-in-time payments to maximize your payables terms and minimizing the impact to your credit.
• T
• Increase Payment Terms. Negotiate payment terms based on receipt of goods or the invoice. This can add one week or more to your terms, which can be 25% of 30 day terms. Use EFT for just-in-time payments to maximize your payables terms and minimizing the impact to your credit.
• T
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
ke Payment Discounts. If you are getting 2%/10 net 30 terms, then consider taking it. This means you are offered a 2% discount if you pay within 10 days, instead of the normal 30 day terms. This translates into an 18% return on your capital, and for many organizations this is a good return on your investment.
• Review P
• Review P
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
rchases. Purchasing is a continuous process that requires continuous review. Consider: transportation charges, expedited fees, odd lot penalties, new pricing, new products, consolidating vendors, new vendors or buying groups, payment terms, and more. Communicate with your suppliers to improve the process. And review and
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
monitor everything to account for changes in your environment.
• Communicate with Suppliers. Communicate with your suppliers to improve the process. Ask suppliers to submit their invoices electronically. This will save you time, resources and losses due to waste.
• Eliminate Disputes. Disputes with your suppliers are t
• Communicate with Suppliers. Communicate with your suppliers to improve the process. Ask suppliers to submit their invoices electronically. This will save you time, resources and losses due to waste.
• Eliminate Disputes. Disputes with your suppliers are t
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
pically the result of a problem with your purchasing/receiving process. When disputes occur, review your purchasing procedures to ensure that they are producing the correct metrics and that you are not forced to pay for your mistakes.
• Reduce Errors. Overpayments, payments made to the wrong vendors, fake invoices, or ev
• Reduce Errors. Overpayments, payments made to the wrong vendors, fake invoices, or ev
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
n late payments represent a common problem for payables. Increasing your focus on error control, along with written procedures and audits, can reduce these errors considerably.
• Train personnel. Provide your accounts payable staff with regular formal training. This will arm them with better knowledge of frauds, negotiat
• Train personnel. Provide your accounts payable staff with regular formal training. This will arm them with better knowledge of frauds, negotiat
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
ng skills, and an understanding of the economics of payables – which will result in improved effectiveness.
Accounting Policies and Procedures for Cash in the Bank
In the past few weeks, we have showed you four parts of your financial statements that will each contribute $250,000 in cash savings. The last hurdle
Accounting Policies and Procedures for Cash in the Bank
In the past few weeks, we have showed you four parts of your financial statements that will each contribute $250,000 in cash savings. The last hurdle
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
as Accounts Payable, and we sailed through it. And now we have crossed our final goal: $1,000,000.
Time was - and is - the key. All you have to do is own it. And, remember, next week we will put together each of the four elements of the cash to cash cycle, and look at how it affects the working capital of your business
Time was - and is - the key. All you have to do is own it. And, remember, next week we will put together each of the four elements of the cash to cash cycle, and look at how it affects the working capital of your business
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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