Smarten up your Creditors Handling
South Pacific
www.spss.net.au/wiki
Table of Contents
Expense Reduction...................................................................................................................................... 2
Team effort ............................................................................................................................................. 2
Business Owner / General Manager ................................................................................................... 2
Financial Controller / Office Manager ................................................................................................ 2
Sales Manager ..................................................................................................................................... 2
Stock Manager .................................................................................................................................... 2
All staff ................................................................................................................................................ 2
7 strategies.................................................................................................................................................. 3
1. Educating staff .................................................................................................................................... 3
2. Business intelligence dashboards ....................................................................................................... 4
For management................................................................................................................................. 4
For your finance staff .......................................................................................................................... 4
3. Reducing the reliance on paper .......................................................................................................... 6
4. Reducing transport expenses.............................................................................................................. 7
5. Purchasing systems reduce expenses ................................................................................................. 7
6. Supplier systems reduce expenses ..................................................................................................... 8
7. Reducing the risk of fraud – purchasing ............................................................................................. 9
Smarten up your Creditors
Page 1
Expense Reduction
Expense reduction is not a crash diet, but a long-term fitness plan. The aim is to create an atmosphere
of restraint, where staff knows that expenses are under the spotlight and proactively look for ways to
reduce costs and improve performance.
Team effort
A Team effort is essential — initially as a review process through to implementing agreed procedures in
a co-operative manner.
Business Owner / General Manager
You must keep an “eagle eye” over expenditure, motivate staff and monitor progress towards the
goals (for example, K50, 000 per month expense reduction in the next two quarters).
Financial Controller / Office Manager
You are responsible for cash flow management so you own the expense reduction task and must
ensure procedures are in place to reach the goals.
Sales Manager
In most businesses you influence a lot of expenditure.
Stock Manager
In most businesses stock purchases are one of the biggest cash requirements.
All staff
All staff needs to understand that expenses are under the spotlight and encourage an atmosphere of
constructive input on cost reduction in all areas of the business.
Smarten up your Creditors
Page 2
7 strategies
We will look at 7 strategies to help manage your expenses.
The secret is to pick the easy tactics which have the biggest impact on your expense reduction first.
Then implement others over time.
1. Educating staff
The better educated your staff, the more value they will get out of their system.
Discuss the importance of accurate, reliable and timely reporting systems to financially manage a
business today, including:





Perpetual stock system: recording all transactions as they occur to accurately calculate:
o Cost of goods sold.
o Value and quantity of stock-on-hand.
o Where it is (for example, which bin, which branch).
o Customer backorders and reservations.
o Quantities being sold.
o What’s on purchase order.
o Correct quantities to re-order.
Purchasing system: ordering what you need at:
o The right price, right quantity, right supplier, right terms.
o Knowing your commitments for cash flow forecasts.
GST reporting: your legal obligations to account for all inputs and outputs.
o Why you amend an invoice with a credit note.
o Don’t post to prior tax periods.
Chart of accounts: reporting income and expenses in the detail you require to help:
o Financially manage the business.
o Meet bank requirements if needed for additional funding.
o Comply with legal reporting obligations, such as the tax office and other regulatory
agencies.
Accounting periods: matching income and expenses in the same accounting period so
reported financial results are not artificially overstated or understated.
Smarten up your Creditors
Page 3
2. Business intelligence dashboards
Business intelligence dashboards are tool that provide a clear view of what is happening in your
business.
Several dashboards can specifically help reduce your expenses.
For management
1. Any dashboard can have up to eight on-screen reports (called gadgets) with default layouts
and your defined access rights governing what is displayed.
2. Dashboards provide a top-down view of your business so you can keep an eye on each area, in
particular to prevent expense blowouts.
3. You can monitor KPIs, such as your debtor days, stock days, gross profit margin, operating
margin, net profit margin etc. against targets and previous periods.
4. You can see your actual figures (for example, debtors, stock-on-hand, creditors and bank
balance) to help assess your cash position.
5. The data is continuously updated so you don’t have to rely on printed reports, spread sheets,
etc.
For your finance staff
6. The dashboards provide visual management so you can see at a glance what needs to be
investigated, without having to be told or run reports, and take immediate action (for example,
freight, advertising, etc. expense blowouts).
7. You can drill down from the dashboard into your accounting data (for example, customer and
supplier invoices, contracts, etc.) without having to navigate through menus or ask other staff
for help.
8. You can perform Google-like searches on part of a name or code for fast access to customer
and supplier masterfiles, for example to check the freight charge on an invoice.
9. You can view gadgets as lists, calendars or graphs and add totals and search boxes to suit your
needs.
10. You can filter and select data sequences, for example the largest overdue invoices.
11. Details can be emailed or exported to Excel to pass information onto a customer, supplier and
external accountant or internally for further analysis.
Smarten up your Creditors
Page 4
12. Several standard dashboards with full security can assist with expense reduction issues,
including:






Debtors: overdue invoices.
Stock: slow moving stock.
Purchasing: supplier price comparisons.
Sales: outstanding customer orders.
Payroll: staff leave entitlements and patterns.
Suppliers: outstanding invoices to pay, ageing analysis.
13. You can embed Customer Relationship Management (CRM) within a dashboard. For example:







Create tasks to recur daily, weekly, monthly or annually (such as follow up various expense
matters). These tasks automatically appear in your To Do List.
See a wealth of customer information: full contact details including email addresses, etc.
for anyone you may need to speak with.
See a customer’s contact history on one screen say to access any emails that are expense
related, such as freight rate discussions and special discounts.
See a customer’s sales history on one screen, including month-by-month product sales,
gross profit percentage, etc. when reviewing expense matters.
Monitor quotes that are in the pipeline to see if they are going to materially impact
expenses, for example stock, freight, warehouse space, staff.
Create customer emails from the screen, using templates for professional communications,
for example, to someone who breached your credit terms or stock returns policy.
Create bulk emails such as a customer newsletter about new products and also include
things like changes to credit card fees to encourage use of EFT.
14. Reports Designer lets you create customised dashboards, such as further expense analysis into
branches or departments
Smarten up your Creditors
Page 5
3. Reducing the reliance on paper
A big reason for poor debtors and stock management, and the resultant increase in expenses, is the
over reliance on paper-based systems.
1. Using drill down in enquiry screens and reports to retrieve documents filed electronically is
much faster and more efficient.
2. Save on costs by having less need for storage cabinets and additional office space to archive
historical documents.
3. You can electronically scan documents and link them to a masterfile (for example, supplier
contracts) so they are readily available for staff to access.
4. Electronic records save clerical time because sales staff can handle most debtor and stock
queries.
5. Use transaction enquiry to access details and ExpressLink to email them to a supplier — while
talking to them on the phone.
Smarten up your Creditors
Page 6
4. Reducing transport expenses
1. Use customer delivery addresses on purchase orders to direct deliveries to the customer when
possible, thus bypassing your warehouse and reducing handling, freight and storage costs.
2. Generate supplier purchase orders from requisitions and consolidate multiple requisitions into
one purchase order per supplier to reduce the number of deliveries.
5. Purchasing systems reduce expenses
Intelligent business systems enable you to formalise your purchasing, helping ensure you only order
what is required, at the right price, right quantity, and from the right supplier on the right terms.
1. Reduce unauthorised purchases by introducing requisitions so staff can make requests that
have to be authorised prior to the creation of the purchase order.
2. Introduce the concept of “Just-In-Time” stocking by setting re-order levels and quantities on
those products that should always be in stock.
3. Automatically generate requisitions from the stock re-order report ensuring that both stock
levels and backorders are fulfilled.
4. Use purchase orders so you can quantify what you are committed to spend. This is essential for
cash flow forecasting and making sure you do not go over budget.
5. Show the supplier’s price on purchase orders so that when the invoice is received, the system
can automatically compare the document totals. This reduces overpayment errors and ensures
the cost of the goods supplied is as negotiated by the purchasing officer.
6. Set up alternative supplier codes for options when sourcing competitive pricing.
7. Create standing orders with regular suppliers to maximise discounts.
8. Consolidate purchase orders from requisitions and set minimum re-order quantities so that
you maximise quantity discounts and minimise freight inward costs.
Smarten up your Creditors
Page 7
6. Supplier systems reduce expenses
Attaché helps give you better control of your supplier payments so you:




Do not duplicate or miss payments.
Know your commitments in advance.
Avoid phone call induced premature payments.
Can seek prompt payment discounts when cash flow is good.
The aim is to co-ordinate your supplier payments with your stock turns and your outstanding debtor
days to avoid “overtrading” (that is, paying money out faster than collecting it) despite being
profitable.
1. Use cash requirements reporting with the amount available to pay option so you are
immediately aware of any potential shortfall.
2. Use the supplier invoice due date to avoid missing out on discounts, penalties for late
payments or upsetting key suppliers where you have special terms.
3. Automate cheque and remittance printing.
4. Know the level of purchases from each supplier so you can negotiate better payment terms
and discounts.
5. Use supplier contacts and notes to store key details that may help when negotiating, and to
record details of deals made.
6. Monitor suppliers’ websites to take advantage of any specials available.
Smarten up your Creditors
Page 8
7. Reducing the risk of fraud – purchasing
A formal purchasing process not only ensures correct payment for all goods and services received but
also makes you aware of all future commitments for which the business is liable.
1. Reduce unauthorised purchases by introducing requisitions so staff can make requests which
have to be authorised prior to the creation of the purchase orders.
2. Introduce the concept of “Just-In-Time” stocking by setting re-order levels and quantities
rather than relying on human judgement, gut feel, etc.
3. Automatically generate requisitions from the stock re-order report ensuring that both stock
levels and backorders are filled.
4. Use purchase orders so you can quantify what you are committed to spend. This is essential for
cash flow forecasting and ensuring you do not go over budget.
5. Show the supplier’s price on purchase orders so that when the invoice is received, the system
can automatically compare the document totals. This reduces overpayment errors and ensures
that the cost of the supplied goods is as negotiated by the purchasing officer.
6. Set up alternative supplier codes so you have options when sourcing competitive pricing.
7. Set a password level or hide access to the following situations so operators cannot:
a. Amend a supplier’s bank account details.
b. Print a purchase order and then delete it after pocketing payment.
8. Flag all new supplier masterfiles as inactive and have a manager remove the flag once they
have been qualified.
9. When entering a supplier invoice, attach the source document or attach the source document
or digital image for instant validation.
10. Use password levels to limit operators’ ability to modify or complete a purchase order,
approve a requisition or change product costs.
11. Customise transaction entry screens so operators can read in purchase orders but not change
costs unless approved by management.
12. Create service items for all consumables and utility purchases (such as water, electricity,
petrol, etc.) to better track and control usage.
13. Print the inactive supplier payments report regularly to determine if payments are being made
to inactive suppliers.
14. If printing cheques, set the system to record cheque numbers so that you have a sequential
audit trail of all cheques drawn, thus highlighting missing cheque numbers.
15. Use the pay selection process to create supplier payments and check the approved cash
required list against the actual payments drawn from the bank account.
Smarten up your Creditors
Page 9