The Hidden Value of Complex Payables

Presenters: Patrick Jones, Product Management Director, Expense and Data Management and Britta Martinez, Senior Energy Analyst, both with Ecova

April 14, 2016

Today’s Goals

Understanding of the complexity of invoices Best practices for auditing Automation tools How to accurately create and hit budget targets Case study

What Makes a Bill Complex?

Data acquisition & data capture– EDI, E-bill, spreadsheet, CD, paper– Number of vendors– Invoice granularity

Frequency

Bill ComplexityBill Complexity

24,200+ Utilities in North America

Frequency & Variability– Is receipt monthly, quarterly, yearly, fixed or variable?– What is the error rate for the vendor, industry, and type

of charge?– Are the price points fixed or variable?

Expense Expertise– How much industry knowledge is needed to audit the bills?– Are charge details simpler terms or complex with many acronyms?

Bill Complexity

Time Is Not on Your Side

The average time for companies to process a single invoice is 17.4-29.8 days

But the average due date on a utility bills is 21.5 days

Very little time to get everything done without really good processes & automation tools

Best Practices for Waste Bills

Waste costs have increased by 28% over the past decade Extra trip charges Duplicate charges Fuel charges Stray fees

Source: Bureau of Labor Statistics (BLS) 2014

Best Practices for Water & Energy Bills

Estimated meter reads Inaccurate consumption Incorrect unit price Errors in unit of measure Water leaks/sewer fees Stray fees

Best Practices for Telecom Bills

Price to contract errors Extra services Extra repair and installation charges Duplicate line and circuit charges Crammed charges Usage optimization

Automation Tools Are Here

Software automation can help simplify the complexity of invoice processing particularly in the areas that have repeatable predictable processes but also to simplify complex areas.

Benefits include: Efficiency gains Improved data quality Improve morale Ability to collect more data Cost savings

Decreased cycle time Data normalization Tracking and audit trail More time for value added activities

Automation Software Examples

Optical Character Recognition (OCR) Workflow tools that can replicate

and assist in process flows Big Data and analytic tools Reporting engines

BudgetingAdding complex payables to an already complex process

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Budget Significance

Facility costs are a top operating expense Complexity of payables add challenges Internal external drivers Accuracy is critical

Step 1: Know Your StakeholdersStakeholders• Procurement• Finance• Energy• Real Estate• Facilities Engineering

CapitalBudget

Rebates

EfficiencyProjects

RegulatedRate

OptionsRegionalVolatility

HedgedPositions

Price TargetsOperating

BudgetForecast

Procurement

FacilityExpenseStrategy

Acceptable Risk Levels

Step 2: Create Your Baseline

Normalize data to fiscal calendar Pay attention to seasonality Review for anomalies and trends

0

5,000

10,000

15,000

20,000

25,000

USAGE

Budget

2015

2014

2013

2012

2011A Budget is Only as Good as the Data & Assumptions

That Lie Within It

Winter Weather Continues to Challenge

Source: http://http://www.ncdc.noaa.gov/monitoring-content/sotc/national/statewidetmaxrank/statewidetmaxrank-201512-201602

Statewide Temperature Ranks: January – March 2014Period: 1895 – 2014

Statewide Temperature Ranks: January – March 2015Period: 1895 – 2015

Statewide Temperature Ranks: Dec 2015 – Feb 2016Period: 1895 – 2015

Include Market Influencers & Regional Intelligence

Wholesale markets are volatile Trends in Natural Gas, pipeline

expansion and decommissioning of coal and nuclear power plants affect regional pricing

Infrastructure changes/upgrades at the vendor

Step 3: Document Your Assumptions

Case Study: Data Acquisition/Budgeting

ABC Corporation AP department strained Frequently missed invoices, resulting in

“shut offs” Late fees were 8% of utility spend Pay invoices as received, lacked critical

expertise and technology to audit or optimize Large variances in budget causing missed

financial goals

Upcoming Webinars

INSIDE ENERGY & SUSTAINABILITY Starving the Landfill: Food Waste 201 – April 26th, 11A PST

Q2 Energy Outlook – May 12th, 11A PST

Q&A

Thank You!