Kraft Foods, Inc., recently received an excellence award from Giga Information Group for its new automated Purchase-to-Pay Information System.1 Kraft, similar to most organizations, was concerned over the cost and inefficiencies of processing purchases and related payments. One of the big efficiency problems arose whenever a purchase invoice was in question. An associate would have to search through mounds of paper to reconcile the invoice with old invoices, paid and unpaid. Application of a consistent set of controls over the process was difficult because of variations in purchase invoices and vendor requirements. Further complicating matters, another department had to calculate the related taxes manually by analyzing the invoice and identifying the most advantageous method.
Kraft’s solution was to implement a new accounts payable system that used advanced workflow technologies to eliminate paper, cut unnecessary steps, and automatically route high-priority tasks to key employees. The workflow technologies automatically capture purchase invoice data and facilitate business process activities by electronic routing of invoices through the required approval procedures for signature validation, audit control, and tax compliance. The system also automatically arranges invoices according to due dates and allows Kraft to negotiate discounts with vendors based on payment date. The results include improved process control, reduction in invoice processing cost from an average of $7 to $4, and improved productivity of 30%. In this chapter, we will explore the processes, systems, and controls that should be in place to ensure that the Purchase-to-Pay process operates efficiently and effectively. Additionally, we will examine specific control procedures that help ensure all payments are made in a timely fashion.