Transcript – M&S Case Study – The Benefits Of Automating Supplier Statement Reconciliation
Below is a transcript for the M&S Story – Automating Supplier Statement Reconciliation. You can watch the original video here.
Good morning everyone and welcome to today’s webinar, where we will be taking you through some of the 5 main reasons that are important to be proactive in AP and what the benefits can be for your team and your organization if you are.
We will be hearing for Sarah Cliffe, the Procure to Pay manager of M&S, and she will be taking you through their journey around automated supplier statement reconciliation journey.
So, as I said we will be hearing from Sarah Cliffe, and she’s the M&S Procure to Pay manager. Sarah is an experienced finance professional specialising in P2P and O2C end-to-end transitions, operations management and process reengineering.
She’s got a proven track record of leading and developing large teams in several blue-chip companies including Premier Foods & Astra Zeneca. Most of you on the call today know I am Elen Leith, the director of PPN Ltd.
We will also, be hearing from Daniel Kimpton from Statement-Matching.com. I’ll be showing you how their solution can help you overcome some of the issues we will be looking at today.
The session is interactive. You will have the opportunity to ask questions as we go along. You can add those into the free text box in your webinar panel on the right-hand side of your screen. So, type these in as they occur to you. I can ask Sarah or Dan to address the questions at the end.
So, with that, I’d like to hand you over to Sarah Cliffe of M&S.
Hi good morning everybody. I am Sarah Cliffe and we have just recently implemented a Statement-Matching.com Solution. I’ll take you through the M&S story.
Firstly, a little bit of an overview of M&S. Our group revenue is 10.7 billion and our turnover is actually split. 61% food, 39% clothing and home of which the clothing and home revenue are 3.7 billion and the food is 5.9 billion. We have just over 1,000 stores and we have nearly 81,000 employees across the group.
So, more about the business service centre which is based in the centre of Manchester. It actually opened in 2003, and the scape of the service centre is the end-to-end procure-to-pay of which I head up that team. We have a sales to cash team that includes all the cash from the stores, cash into the business. We have an R2R team that is general accounting, fixed assets, includes property accounting, intercompany inventory and we also, have a treasury back office as well. We also have a business-to-business team and the B2B team are primarily focused on our trading packs, our weekly, daily standard reporting across the business.
Currently there are 130 full-time employees in the business service centre, and basically, we are transacting, protecting and driving performance. We deliver effective transactions, data management, and process excellence. So, really that is the remit of the service centre.
So, a little bit more about the procure to pay operation within M&S. We process either electronically or via OCR format. They’re the two formats of invoices that we receive. Just over 4 million invoices a year. All the clothing and home, they’re in an EDI format and our goods not for resale are GNFR invoices. We have an OCR Solution to manage those invoices.
We have 8,000 active vendors across the group and we use SAP version 4.6. Currently, we are just investigating the implementation of SAP HANA.
Within the P2P team, we have 38 employees and the team is split into 4 sub-teams. We have an invoice processing team, a vendor management team that manages the EDI Solutions, and manages the GRIR, the vendor statement reconciliation process. We also have a vendor support and a compliance team. This is the first point of contact for anyone internally or if any of our vendors should need support.
This team also, go out and do training within the business primarily on the GNFR process. We also have a payment and an analytics team. The payments team obviously make all our supplier payments which also includes all our expenses payments and they do a lot of the analytics on our standard reporting and our KPIs and also, reporting anything that we need to report externally outside of M&S.
So, the Purchase to Pay challenge. In most organisations, the AP process is largely reactive because being sat at the back end of the process and the focus is getting our invoices into a system and paid on time. We also, deal with high volumes of supplier queries and we have to be very mindful of any duplicate invoices. We do have quite a robust, albeit it’s not the most up-to-date technology, that helps us identify duplicate invoices prior to any payments.
Obviously, we are also, chasing the business and that the business users not only do their part properly but also, they understand the end-to-end process. We also have a buildup of our GNRI balances that is where the P2P team can add value. What we are trying to do is be more proactive and this will really help M&S improve KPIs, not only internal ones but more importantly, our external KPIs. One of the key KPIs that we are signed up to now is the new legislation where we have to report externally, our payment performance across the business.
So, this leads me on to a supplier statement. So, I’ve been at M&S for just over 17 months now and historically M&S have not completed supplier statement reconciliations as a routine, day-to-day business process. Historically, supplier statements were just prepared at the end of the financial year to satisfy external audit requirements. The auditors would take a sample and the AP team would just provide reconciliations based on that sample. We actually identified a need quite early on to introduce a standard business process that really helped reconcile our statements.
So, that’s the project albeit an internal project. It was all done internally within M&S with the support of IT. We didn’t use consultants, so it was implementing a business process that reconciles our vendor statements on a daily basis. This process had an improvement in our payment on-time performance. It has reduced the number of supplier queries that we have received via our vendor support desk. It actually helped us improve our accruals and our cash flow forecasting.
What we have done as a side project to this, we have been working very closely with our colleagues in food finance, clothing, and home finance to try and get a bit more visibility on our cash flow forecasting, to try and do quite robust forecasts, and understand why we do not reach our forecasts and the actual improvement of the smoothing of the GR/IR. The statements actually really added value into that, It has also improved and validated our trade payables balance at the end of the period as well. We have also been able to relieve East aged GRI our balances based on a statement MEK rather than just on an aged a certain date which historically M&S have done previously.
Why reconcile supplier statements?
This helped us identify missing invoices but more importantly missing credit notes because we actually found that as a business we weren’t receiving credit notes that we were entitled to. We have also, identified miss-postings so, invoices that we have on our ledger but not even owed to the vendor.
We have also identified vendors that have not followed the M&S process or taken advantage of an M&S process. This has caused issues with a high volume of errors. We have been able to fix this at the beginning of the process prior to invoices coming into an AP and working very closely with those vendors.
It has identified discrepancies before they become issues. It helped us resolve errors that in effect have cost M&S money. It has ensured all the credits are applied, it has reduced our supplier queries, and improved the accuracy of our trade payables balances.
But ultimately has enabled this to support the release of the GR/IR balances which we do on a weekly basis. We manage our GRI balances very closely. Going back to the setup of the little project, and that we embarked on internally, So, the scope was all our active vendors which were the eight million.
Therefore, the four million invoices that go through the trade payables ledger annually. We needed to implement an automated supply a statement reconciliation process with no increase in headcount. We were looking to in effect shift the work to be a little bit more value-added, and the solution had to take the M&S supplier statements to match at line level data, which can be quite complex, and all that data that we held in our SAP solution.
The solution also needed to accept paper PDF and Excel statements. We wanted to make it as easy as we could for a vendor to send details of our accounts, So, we did insist that we needed more than one option. Also, we wanted an option where vendors could upload their own statements. Anything that we look at the moment in annum in Marks and Spencer is that we are trying to make it as self-service as we can.
We also wanted the onboarding process to be simple and we actually decided that we were going to take the Big Bang approach. We just decided, we are just going to use Big Bang, we are going to focus and on our GNFR suppliers. Then with the food, with the clothing, and home. But it had to be a big bang across all these sectors. The partner we would be choosing had to be long-term because obviously, the supplier statement process we are implementing is an ongoing business process.
It needed to be like-minded and build on an ongoing working relationship, we wanted a solution that we would take, and then we could say right well can we look at this, can we improve this, can we feed into any future developments that need the software. They were the main objectives and the drivers of what we wanted to do.
Again, all our suppliers were in scope food clothing in-home and GNFR. There was nothing that was out of scope. We have an automated daily file upload from SAP Solution that gave us into Statement-Matching.com. This is basically if anybody’s using and SAP, its equivalent TFBL1 that summarizes all your payment details, invoice details at the vendor level.
We then started to identify our top edge suppliers and our key suppliers. As a pilot before we actually went live, we looked at some of them our vendors, and across the three sectors where we had issues. We had high volume calls, we had and invoices that kept going missing where we had 8 GRS or where we had issues with purchase orders. We contacted those vendors, we asked them to send through statements for us to reconcile, So, we could get a feel or for the prize that we were in effect looking to achieve.
The approach that we talked was, that we identified a member of the vendor management team, So, this is the team that manages the EDI invoices, they also, manage the GR/IR, they also, manage the queries. We identified a member of that team to be a superuser so they would take this take process and they would develop it internally to make sure that we are encompassing all the M&S processes. They also, develop training material to ensure that the rest of the team were on board with the concept of statement reconciliation process.
Because we have got to bear in mind this is a brand-new process at M&S. Because we didn’t do statements previously, so, it was really important that we got over to the team how important it was to do a statement reconciliation. What we will try to achieve and it was also, to make sure that they understood the whole end-to-end process to ensure that we had a consistent approach. What we didn’t want is somebody saying well I’ll save menu to a spreadsheet, I am going to do it this way, we said we wanted one way of doing it but what we did today was that the whole of that team can build in and they can import that final process of how it would be. But they agreed as a team and to ensure that they were consistent, and when we operated it on a BAU daily basis.
The benefits that we achieved, we actually achieve these sort of like quite an early on really and that is probably because M&S historically haven’t done statement wrecks. I think if you are in an organization where you do you may not realize the benefits as quickly as we did. But we definitely got a smoothing of the GRIR release which in SAP and terminology is the mr11. Historically M&S have just done a GRIR release after 180 Days. Then what would happen is we would then get an invoice after that, and then we’d have to reverse it all.
It also gave us a robust audit trail supported by the reconciliations in the MR release process, So, this was invaluable at our financial, our recent financial year-end. We were able just to provide all the data to the auditors and that supported the releases rather than our external auditors going in and questioning why we made releases, and when we made the releases. It was all supported by the recs, it also, meant that our external auditors didn’t actually have to go in and identify suppliers for us to reconcile because we have actually done all the key suppliers.
To date which I think is day 2d is actually at the end of November with released 4.7 million of GRIRs, and 2 PNL, and we have also, reconciled over 300 supplier statement wrecks. About reconciliation of the 300 plus is not a one-off because the way that the process works that we have implemented, It is an ongoing process. For example, if we do a supplier reconciliation and we identify that we have got a hundred invoices that are missing. That reckons that reconciliation automatically gets them to the vendor, the vendor then just downloads and puts the invoices into the portal, and it will also, automatically then do a reconciliation.
There is an ongoing process, we drastically reduce the volume of aged invoices and I think now because the vendors know that we are doing regular statement recs, and we have eradicated that, we have actually introduced the statements as we have just reviewed our terms of trading with our food, clothing, and home vendors. That is one of the conditions of trading now that if we request a vendor should send in a statement at least once a month for it to be reconciled. We have also, identified supplier invoicing issues, we have been able to support them So, one of the examples here was one of our wine suppliers, they were just struggling getting the invoices into M&S and due to that the configuration of their system not compatible, and we were able to support them, give them the resolution.
I think it was going back something about eighteen months, we had some quite aged invoices for wine. We are now in our next step, as part of the solution for Statement-Matching.com. You also, get a portal so we have access to this supplier portal, we didn’t switch the portal straightaway. Because we didn’t feel as though we were in that position at the time for the statements, we wanted to prove the concept of statement matching, and then when we implemented our OCR solution which was the beginning of October.
That is when we switched the supplier portal on, and initially, that was for our GNFR vendors. Basically, the portal that we have now for GNFR vendors, they’re able to view the status of their invoices including any invoices that have been rejected. They can also, view the due day of any approved invoices, and they’re able to drop in statements to support that continual reconciliation process.
The GNFR was really a pilot for us, and again it was offered to all the GNFR vendors at the same time. We didn’t go through we will do the first 20, we will do the next 40. It was all the GNFR vendors with we were communicated to, and they were all invited to register for the portal. So, for today we have had excellent feedback. That’s when we are now looking to roll out the portal of which we have just started to do it in December, we are rolling out that portal to our food vendors and bearing in mind that the food vendors and It is the highest volume of our invoices.
Even though the clothing and home will probably be the highest value. When we go through and we identify what wrecks were going to do, or which racks we really want to focus on, we do that through three separate routes. We have a monthly Procure to Pay operational review, and we will go through our KPIs we will go through what’s the driver of the KPIs, and a couple of vendors may come up through that. We also, have detailed monthly balance sheet reviews and these are for food, and then we have a separate one with clothing and home.
This is with the finance people in them in both respective areas, and we will get into the detail of the ageing of the GRIR, anything and initiatives that we do with new suppliers. For example, what we looked at here, and back in November is we knew that sort of during November, December it is a peak time for our meat suppliers. What we did to make sure that we were on the front foot, we reconciled all our meat supply. So, we knew at the beginning of the page we were completely up to date.
We resolved any issues we had prior to going into our peak period. We also have a weekly Procure to Pay GRIR review, and this is across the board. We get into specific departments here and this is where we look at the ageing of GRI, IRGR and GRIR. We will identify vendors that we think things don’t look quite right or well.
We have got somebody in the business who is a little bit concerned, so, out of those three areas, that’s where and we start to reconcile our accounts. The aim is that all members of the Procure to Pay team will reconcile statements in a consistent way. At the moment it is just down to the vendor management team but we do plan to roll that out and write the way across the team and that will in effect, we will set the bar to work in the Procure to Pay team within M&S.
You have to be able to reconcile a vendor statement which probably sounds quite simple to maybe other organizations. But it is a big step for M&S.
Okay, thanks very much Sarah, that’s fantastic. I am sure everybody’s got some really useful information from you there. If I can hand over now to Daniel Kimpton from Statement-Matching.com, he’s going to just explain some of the ways that his solution has been able to help M&S through their process, over to you Dan.
Okay, yeah. Hi there everyone, So, my name is Daniel Kimpton, and I work for Statement-Matching.com. What I thought I’d do was just show you what the system looks like, So, I’ve got some screenshots, and I am going to kind of walk through the kind key features, and show you what it does. It is a cloud-based system, So, M&S users access it via a browser, and then when you actually land in the system you get to a dashboard, I’ll explain what you can see on the dashboard.
You can see I’ve got some kind of key reports in the middle section, and then on the right-hand side which I’ll just zoom in on. When the statement goes into the system, it reconciles the statements against your ERP data, and it gives each statement a status. I’ll explain what they are. On the top where it is fully matched, so that means that all of the documents on the statement are on your ERP system, and then you have got no unpaid invoices on the vendor’s account.
That is not on the statement, so when Sarah is talking about doing whether GRIR are clearing if you have got a fully matched statement that means that you have got everything and there are no outstanding invoices for that vendor. In theory, if you have got any goods receipts that have not been invoiced, and they’ve got a posting date prior to the statement date, then they’re the candidates for you to then clear them down.
That’s what people use the fully match status for. But effectively there are no exceptions from her from a reconciliation perspective. Moving down, the second one; fully match with data mismatches. That means that you have got all the documents but actually, there are some differences so, if you look below where it says statement lines, you can see I’ve got somewhere the invoice dates are different, I’ve got debits and credits the wrong way around.
I’ve got currency errors, and then amount errors. These could be issues when you have input the invoice, a user made a mistake or it could be an issue with the vendor’s invoice. But if you identify on a timely basis, go and fix them, and then that links back into improving your payment performance. Because you are resolving issues on a timely basis, and then the next two. The third one down on paid items missing from the statement, that means that you have got invoices on the ledger, that is not on the statement.
If they’re open on your system, but they’re not on the supplier statement then it could be posted to the wrong vendor’s account, or it could be a duplicate, again that’s where you might spot your duplicates. Then lastly the one at the bottom, this is really the key one. Incomplete matching, that means that you have got documents on the statement that is not in your ERP system. This is where you are missing invoices, and you are missing credits.
What I’ll do is, I’ll show you a couple of examples so, that you can see what the details look like. On the dashboard I’ve got some key reports, the first one that people are to look at is missing credits. If I run the missing credits report, It is going to give me a list of statements where I’ve got missing credits, you will notice it puts the highest value one at the top of the list. Then from this screen, you can actually drill into a statement and then look at the detail.
It is really simple, you can see I’ve got the statement data on the left, and then the invoice dates on the right. Everything on the statement is matched, but you have got the first line on the statement is a credit, and it is missing. What you would typically do in a process here is you can either email the vendor from my system, or you can download the report and send it from your own email system, it is up to you.
But basically the vendor gets an email with a PDF attached and this is what the vendor sees. If this is on the M&S system, you’d see the M&S logo in the top left, and you can see where I’ve got the missing credit, we can default some text on to the report. We are saying to the vendor we need a copy, and then the other cool thing is, I know the status of the documents on your ERP system, So, you can give the supplier the status of each line on the statement. You can also, give them due dates for payment, and you can see I’ve got one that’s paid.
You can see I’ve got a payment reference as well. This is really useful information for the supplier because this is typically what they’ll be bringing you up for in accounts payable, and then back on the system. What we tell people to do in the training is to add notes in the system when you do something. I’ll just put an action on a vendor to request the credit so, you can add notes in the system. Now the next month, if you get a statement from this supplier, and this credit is still on the statement, you will see that you have added noes previously, that you have requested the credit.
If they’ve not complied, then you might want to kind of builds up an audit trail in the system which is really useful. Now I ran a report to sum up my statements in that scenario but in in the shared service centre typically people are organized by company code, like legal entity or it might be like it might be based on the suppliers. If I might be responsible for suppliers based on the alphabet for example, So, they would use this selection screen to kind of select their statements.
You can choose which statuses that you want to select, and then you can also, save your search because you probably selecting the same statements all the time. But if you run it, it gives you a list of statements and once you are on this screen, you can sort them by statement total, if you want to work on the big ones, or you can sort them by statement date, any of these columns can be reordered.
If I select one from the list, I’ve got one at the bottom which is fully metadata mismatches. Takes you back to this screen, there are lots of lots of green ticks on the front page but this is quite a big statement. You would filter on it, it basically shows the errors. Because we know there are some errors in there somewhere, and then if you look closely on the first line, I’ve got an invoice on the statement for 105 78, and then if you look at what It is been matched to.
It is been matched to a document where It is been put on with an extra 1 on the invoice of mail. It is probably a keying error or an OCR error. Then the second one down, that’s a credit note on the statement and it is actually on your system as an invoice, so, It is a really big error that you want to spot and fix. Then you can see where some I’ve got the dates wrong and the amounts are incorrect, and what would happen on your system, you would fix these on your ERP system and then because we get a daily file from our customers of all the updates.
If you correct them in your ERP system, the file is going to come into here, and then this statement would get re-reconciled and all of these lines will turn matched if you fix them. So, that’s the idea, it continually reconciles the statements based on the data that comes in.
Then the last example I was going to show was where you have got documents on your system, which are not on the statement. It is the one at the top, it takes you back into this screen and you can see everything on this statement is matched, which is great. We have got a section at the bottom called unmatched RPM voices if you look at the entry I’ve got an invoice for this vendor for 280 680 is unpaid dated the 25th of Feb 15. Then if you look upon the statement, what are the invoices on the statement are actually between the 6th of March and the 25th of April.
It looks like it is a regular amount from this supplier, you can see I’ve got one for the same amount in March and another one for the same amount in April. It is probably a duplicate of the Feb invoice. But I’ve spotted it, so, I can go and reverse it. We have got lots of reports on the system if you want to preview, got a critical list of suppliers that you want to reconcile. For example, you can flag them up, and then you can run a critical supplier report to make sure that you have reconciled them all this period.
You can also, select your statements based on the type of error. If you want to prioritize missing credits. you can go look at the missing credits report and then kind of work through them based on your own priority sequence. I am not going to look at any other reports, because I just wanted to show you what it looked like from a vendor’s perspective quickly. If I am an M&S vendor, which obviously I am because they use statement matching. They would invite me to the portal, I would get an email, and this is the landing page.
I’ve got a menu on the left; I’ve got a tab called my invoices. If I want to go and look all my invoices on the M&S system, it lists them all out, and I can see the status of it, I can see the due dates, the payment, and I’ve got one there that’s paid. You can actually search for specific invoice numbers or payments if you wish, and you can also, submit messages on this page as well which M&S would then get a query.
If I want to go and look at my payments. I can also, look at payments, there is a separate tab and then if you click on a payment, it will show me the invoices that are in that payment. From an IR perspective on the vendor, the side is really useful, and the whole idea of it is to reduce the supply of queries if they’ve got access to this. It is really simple to use.
The third part, this is great if you can get supplies to do this, you can give suppliers the option of uploading their own statement. Now they can email statements in, they can email PDF I mean they can even send paper if you want. They can get in to statement matching anyway, but ideally, it’d be great if suppliers upload their own excel, and all they have to do is they upload the excel and then it just basically puts the column headings in the excel on the right-hand side, and then you have to map them into the system.
You can see our maps invoice number on the excel to document number, and then I’ve got the amount, the invoice date, and the currency. Once you import it, the vendor can go and look at the reconciliation results immediately. You can see I’ve got Some missing documents on here, I’ve got a currency problem, and then, of course, M&S can see the same results on their side. It is great and then they can identify, they effectively make sure that M&S have got all their documents so that the whole process goes smoothly.
I will just finish on one point that Sarah picked up on her presentation as well. We do a proof of concept with all potential customers; you can do it for up to ten vendors where you can download data into Excel. Anyone in AP can do this, you don’t need IT support. You can download the data into Excel, you can give us the statements, we will build the system, we will set up a training session, which takes about an hour, which we do via WebEx. Then that’s the day that the four weeks POC starts, So, you can see the solution working with your own data.
If you are interested in the portal, you can even invite some of the suppliers to participate in the POC, and give you feedback on the portal if you wish. So, that’s available to everyone, and pricing, we can follow up after their pricing. But it is basically a subscription, It is not like front costs or setup costs, it is just a monthly cost based on the annual volume of the invoices you process. Then there’s a variable charge, which is based on the number of statements that you upload. It is a 30-day rolling contract, no minimum term. That is it for me, I am conscious at the time. So, I am going to hand back to Ellen to take any questions, So, yeah thanks for your time.
That is great, thanks very much Daniel and to you Sarah as well for a fantastic webinar, and Some very useful information I am sure for everybody there. We have had a couple of questions and I think if I can direct them, the first one across to you Sarah and somebody’s just asking “how long was the change management process before the Big Bang?, I guess they’re referring to the implementation that you made there.”
Well I think, we did a proof-of-concept. So, we actually implemented, and within a couple of months, the longest period of time was actually working with RIT to get our download of data. But what we did? We manually downloaded FBL 1 then, until we got that automated. It is a relatively quick process and because the change management was in procuring the payment within our control, it was actually, and it made it a lot simpler.
Okay, all right, thank you. Another question, which I think Dan you might be able to answer. It’s “how did you get the statements into the system?”
Okay, there is a couple of options. Obviously, I finished on the portal sources, you are using the portal, the vendor can upload it themselves, if It is Excel or they can submit PDF email attachments to a default email address. That is one method, but without the portal basically in Accounts Payable, M&S can import their statements that they receive in Excel format. If it is Excel, the customer imports them.
If it is a PDF email attachment, you would forward them to an email address that we provide. We extract the data from the PDF as part of a service and then we put it on the statement matching within 24 hours, it is the same in paper. You would scan paper statements to the same email address, and then we extract the data and get it onto the system for you.
It is kind of a managed service for paper, PDF, and then Excel. You can import directly into the system.
Okay, thank you. Another question for you Sarah. “Does M&S uses PO for all purchases? So, do you have a PO for all the purchases?”
Yeah, we operate no purchase order, no pay. That is across all the sectors food, clothing, home, and GNFR.
Okay, all right, thank you. Another question “Can statement matching review PO numbers as well as invoice numbers?”
I’ll take that one if you like Sara. Within Statement-Matching.com, it was honest for suppliers’ statement you typically have the invoice header information, which by and large doesn’t include the purchase order. But we do have some customers who are getting suppliers to put the purchase order number on the statement, then they want to then use that and to compare against the purchase order that they’ve got on their ERP system.
On statement matching, on the import, we have got five customer fields, you can use those customer fields to bring in whatever data that you like. Obviously one of those data fields could be purchase order number, then that purchase order number would then appear in a column on the reconciliation screen that I showed when I was going through the screenshots. So, yes, you can bring purchase order numbers and other data to see the process.
Okay, thank you so much. We have also, had a few questions with reference to the slides. Yes, they will be available afterwards, and should anyone have any further questions, we have had a couple of other questions as well. We can get those answers back to you but I am just conscious of the time now. Those slides that you have been asking for today’s session will be available afterwards, we will get those sent out to you together with the recording as well.
If you do have any questions or on the back of those once you have received them, then of course just email them across to me, and I can either ask Sara or Danny from Statement-Matching.com to get those answers back to you. But in the meantime, if I could just ask you to please lookout for the next and final webinar that we have over the year on the 18th of December.
I hope you will join us for that one. But for now, thanks again to Sarah Cliffe from M&S and to Daniel Kimpton from Statement-Matching.com, and to you all for joining us this morning. I hope you have enjoyed it, and thank you and enjoy the rest of your day. Thank you.