07 Accounts Receivable c

Process Confirmation – Accounts ReceivableR-010 thru R-060

Project XYZ Initiative April 22ndth 2008

2

Team Presentation Contents

• Key Count Summary

• Process Summary and Objectives

• Leading Practices and Key Features

• Process Optimization Opportunities

• As-Is and To-Be – Significant Process Changes

• Identified Gaps

• Policy and Board Rule Impacts

• Change Impacts

• Controls Framework

• As-Is and To-Be – Major System Changes

• Key Development Objects

• Support Required from the Steering Committee

• Implementation Challenges

3

Key Count SummaryItem CountProcesses: 6

Tasks: 44

Worksteps: 125

Roles: 9

Potential Development Objects (excluding reports):

9

SMAs: 30

Review Sessions: 17

Validation Sessions: 1

4

Process Summary and ObjectivesSummary R-010 – Maintain Customer Data

This process deals with the approval and maintenance of customer master data elements such as the customer account group, address information, reconciliation account, correspondence types, dunning information, payment terms, etc. It involves managing customer master data from a centralized perspective. This process ensures that all potential Governmental and local entity billing and receivables data is identified and that the data is accurate and complete

Objectives• Define the request and approval process for central maintenance of the customer master

data elements (i.e., customer account groups, address information, reconciliation account, correspondence types, dunning information, payment terms, etc.)

• Create additional transparency in the flow of information, thereby increasing control of master data and mitigating risk

• Maintain one single, central master data database for all customers throughout Client X. All customer master data will be maintained within one department

• Establish clear policies and procedures on the criteria for new Customer Master Data request, set up and maintenance.

• Define realistic turnaround time for the creation or maintenance of master records• Set up impact matrix to identify the related impact of master data changes and timely

notify the affected parties

5

Process Summary and ObjectivesSummary R-020 – Compute and Issue Invoices and Statements

The compute and Issue invoices/statements process deals with the creation of Accounts Receivable entries within SAP. The process begins when a customer has been provided a good or service. The various departments must record the charge and apply it against the customer’s account. An invoice may be generated from SAP and mailed to the customer. The invoice number will match the accounting entry against the customer account. There are several different types of billings: Grants, Facilities, Internal A/R at Schools, etc. The following departments will create receivables in SAP:

•9241 – Facilities Operations-Maint.•9025 – Food and Nutrition•9217 - Govtl Affairs & Land Use•9937 – Schools Police Administrative Division•9129 – General Accounting•9112 – Risk Benefits Management•9321 – Payroll (Release 2)•Schools (Summary Receivables)

Objectives• Provide a centralized view of Account Receivables and balances due • Define a standardized process of recording receivables• Define a standardized process of creating credit memos, adjusting invoices and reversing entries• Provide standardized billing correspondence• Provide robust report capabilities (customer forecasting, overdue balances, open line items, etc.)

6

Process Summary and ObjectivesSummary R-020 – Compute and Issue Invoices and Statements (schools)

The compute and Issue invoices/statements process from the schools perspective will differ from the District in terms of detailed receivables. Schools will have the ability to create summary receivables and record cash receipts in SAP.

Objectives• Provide a centralized view of Account Receivables and balances due at the school

level• Define a standardized process of recording summary receivables at schools• Provide various Summary A/R reporting capabilities

7

Process Summary and ObjectivesSummary R-030 – Process Receipts

This process involves the receipt of payment for products and services provided. This includes the deposit of those receipts, application and recording of cash receipts and updating of financial records. Receipts can be received in many formats, both manually and electronically. The objective of the process is to receive and deposit these amounts in the shortest possible time with the lowest processing cost. The receipting process for Client X will be centralized as the Treasury department will be responsible for receipting all payments. However, it should be noted that the AR department will clear all receivables (Contracted Programs personnel will clear all grant related receivables, General Accounting personnel will clear all other remaining receivables. Some ACH, EFTs will come through Treasury directly via the ICMS-SAP interface, no application of cash will be required. The interface will post the cash to the correct accounts in SAPSchools will continue to receipt their own incoming payments and will leverage SAP’s cash journal for this purpose

Objectives• AR department within General Accounting will clear all district receivables• Standardize the business process, improve the timeliness of the application of cash• Provide real-time-cash management reports and provide accurate cash forecasting• Improve the reconciliation process

8

Process Summary and ObjectivesSummary R-040 – Manage Accounts Receivable• This process involves administering policies and procedures for:

- Receivables management- Tracking and reporting receivables data- Gathering and analyzing data

• Process allows for the identification of performance changes of particular accounts or account aggregates and adjusting the operational behavior of the organization (through policies and procedures). Therefore addressing changes in an effective and timely manner.

Objectives• Standardize the collections process and provide tools and correspondence to help expedite

the process, i.e. dunning program and dunning letters• Provide a centralized view of the customer account and open items• Create a Central Unit within General Accounting (AR) which will oversee all collection

operations

9

Process Summary and ObjectivesSummary R-050 – Compute and Issue Refunds or Credits

This process computes account balances, identifies refund/credit customers and invoices, and recalculates refund/credit balances for specific accounts. This process includes consolidating refunds, generating and sending relevant correspondences and credits/refunds, and processing customer complaints and inquiries. All credit memos will be automatically blocked and must be approved by the AR Supervisor prior to posting. Credit memos will either be applied against outstanding receivables or a check will be cut and mailed to the customer

Objectives• Standardize the credit memo process and maintain policies and procedures in respect to

issuing credits• Automate the approval process to ensure that all credits are approved by the AR Supervisor

prior to being applied against an outstanding debt or paid to customer• Provide real-time data to assist in the determination of whether a credit should exist on the

customer account

10

Process Summary and ObjectivesSummary R-060 – Provide Customer Assistance

This process is an essential component for an efficient, customer-driven organization. This process includes serving as the initial point of contact for customers, and other account holders who have questions regarding their account. It involves referring complex issues to business experts, resolving appeals/disputes, and providing Account Statements and additional copies of invoices etc

Objectives• Provide real-time data to assist with various customer queries regarding their account• Provide ability to generate Account Statements for customers and reprint customer invoices

upon request

11

Roles within Accounts ReceivableRole Role Description

Customer Master Data Administrator

Involves the creation and maintenance of all customer master data. Access to the customer master data transaction (create and maintain) are limited to this role

AR Clerk Set up and maintenance of all receivables within a specific department, managing all correspondence and managing collection activities and reconciliation of customer accounts

AR Supervisor Management of all the activities performed by the AR clerk. This roles involves the approval of invoices, credit memos, adjustments etc and overseeing the collections process

Treasurer Management of liquidity risk management, cash management, issuing debt, and capital structure

Cash Application Clerk Application of cash and clearing of receivables within the AR department (General Accounting)

District AR Manager Oversees cash applications and collections from a District perspective. Removes payment block on credit memos and approves/rejects write offs

School Cashier Receipting and posting of all incoming payments into the school sites

Internal Funds Clerk Involves the administration of cash management at school sites and creating of summary receivables

Principal Administration and management of all school operations

12

Leading Practices and Key Features

• Manage and maintain one consolidated customer master database to ensure accuracy, proper maintenance and security procedures - therefore reducing data redundancy

• Automate the approval process for master data maintenance and complete a master data change request in a timely, structured, and controlled manner

• Provide an audit trail report to capture all financial entries against a customer’s account, including reversals, credits, payment history, etc.

• Leverage integrated information systems that allow different departments to share data.

• Standardize AR processes, such as billing, issuing invoices, applying credits and collections, etc.

13

Leading Practices and Key Features• Automate the process of dunning/collections across the District

• Leverage real-time customer balances and conduct various types of analysis and generate required reports

• AR processes are tightly integrated with all SAP modules and provides real-time updates to receivables balances

• Establish and enforce a comprehensive policy for recording and management of receivables and collections, which will increase timeliness and accuracy of AR information

• Standardize and centralize the receipting process with Treasury posting payments to cash clearing accounts and the AR department applying cash and clearing receivables and posting cash receipts to respective revenue account

14

Process Optimization Opportunities • Current and Proposed Service Delivery Model

• No central master database for the management of customer master data. Customer master data is stored and managed in offline files (i.e., excel spreadsheets). Opportunities exist to realize increased control, consistency and efficiencies by creating a department within General Accounting to create and maintain all customer master data.

• AR processing occurs in multiple departments via different models and processes• Multiple different systems and tools are used to record receivables, such as QuickBooks, Peachtree, Excel spreadsheets, etc.

• Opportunities exist to realize increased control, consistency and efficiencies by standardizing the AR process and providing a model for all Departments to follow when managing receivables

• Process Optimization - Increased efficiency and control resulting from: • Defining and centrally maintaining approval/change process• Requiring customer master data request forms to be emailed to the customer master data unit mailbox.

• Assigning one group will mitigate the risk of duplications• Define and standardize Accounts Receivable process• Provide a consolidated view of the customer and outstanding balances across the District

• Define and configure AR reports to assist with the management of receivables and forecasting

• Standardize the correspondence associated with billing, dunning and receipts, etc.• Automate approval process for billing, credit memos and write-offs• Centralize receipting process with Treasury posting all payments to cash clearing and AR applying and clearing receivables

15

Process Optimization Opportunities (cont’d)

Other efficiencies:• Retain all completed requests for auditing purposes, ensuring statutory and management

reporting requirements• Enforce policies which will help ensure that a consistent naming format is used for master

data and that the master data elements are used for the correct purposes• Real-time integration between all SAP modules, with improved controls through system

checks and balances across all functions• Processes will be monitored to ensure that policies are closely followed and adhered to

16

As-Is and To-Be – Significant Process Changes

• Each location with Client X creates and manages customer master data in offline files (excel) and all have different processes and retain data differently

• Decentralized receipts. Payments are received at various departments and forwarded to Treasury. This is a slow and in-efficient process

• No consolidated view of outstanding balances

• No AR sub-ledger within MSAF - a cash based

• Consolidated customer master database,standardized customer master data definitions,and consistent policy for customer master data creation and maintenance

• Centralize the receipting process where Treasury will post all incoming payments to cash clearing accounts and the AR department will apply cash and clear all receivables and post cash receipts

• Consolidated AR processes and real-time reporting information fully integrated with GL

• Centralized view of customer balances and receivables. Standardized AR processes and management of receivables

As-Is To-Be

17

Identified GAPS

• No identified GAPS for Accounts Receivable

18

Policy Impacts

• Establish policy and procedures for the following:

– Provide guidelines and criteria for the creation, block and deletion of data– Customer master data request approval process, defining the roles of originators and

approvers, additional data updates and validation– AR processes, Invoice adjustments, reversals and credit memos receipting and

collections– Invoice approval process, defining the roles of originators and approvers– Dunning procedures and correspondence types– Adhere to current board rules in respect to write-offs

• Define mission, goals, objectives of new Centralized Customer master Data unit and AR department and establish master data management governance, policies and procedures

19

Change ImpactsCategory• Centralized Customer Master will lead to consolidation of customer master data,

provide approval controls and changes in policy. This is a new process as maintenance of customer data was maintained by the individual departments

• Accounts Receivable is a new process for the District. The various departments will now create an AR entry in SAP and generate an invoice and mail to the customer. Revenue will be recognized at the time of invoice

• Require new trained resources at the District to perform and manage the new AR tasks

• Benefits of Change• Centralized maintenance process provides:

- Increased controls- Increased transactional efficiency- Reduction and duplication of customer master records

• Consolidated view of the customer across all divisions• Real-time updates to receivable balances• Real-time, on-line, customizable reporting on AR transactions• Less reliance on paper based reporting and analysis

20

Change Impacts (cont’d)• Risks Associated with Change

– Departments may experience a delay in the processing of customer master data (implement policy to enforce a quick turnaround)

– AR personnel must be hired and attend the training provided in order to understand the Accounts Receivable module

– Ensure personnel made a good faith effort to collect outstanding receivables as auditors will question overdue receivables

• Implementation Requirements– Assign a role which involves the creation and maintenance of customer master data,

management of the process on a daily basis– Assign a role which involves the processing of receivables within SAP

• Impacted Audience– All departments within the District who require customer master data to be created

and the end users within the department who will be responsible for managing the process

– All departments within the District who process receivables within SAP

• Level of Impact– High

21

Controls Framework• The centralized customer master data group reviews and approves the customer master

data in accordance with established policies and procedures mitigating the risk of inaccurate or duplicate master records

• End Users within the various departments will complete the customer master data request forms and submit to the customer master data administrator for approval

• Controlled access for the following:– Creating and changing customer master data transactions are restricted to the

customer master data administrator roles– Attaching a customer master record to a Grant Sponsor will be restricted to

authorized Grant Management personnel– Processing AR invoices are restricted to authorized personnel– Reversing or adjusting an invoice is limited to specific individuals

• SAP reporting capabilities provide audit trails including details of all customer master data addition or changes

• Workflow will be leveraged to ensure only authorized individuals may approve invoices

22

Controls Framework (cont’d)• Segregation of duties is observed between the Maintain Customer Master data function

and the process customer invoice function. These processes will be managed in separate departments

• Segregation of duties is maintained by separating the creation of receivables and receipting payments functions. The receipting process will be centralized with the Treasury department where incoming payments are posted to cash clearing. The AR department will apply cash to customer account and clear receivables

• Bank reconciliations are performed between the bank statements and SAP bank transaction activity. Differences are investigated and resolved on a timely basis

• An approval process via workflow will be utilized prior to posting for:- Bad debt / write offs- Adjustments to customer accounts- Credit memos / refunds

• System functionality prevents invoices from being reversed if already paid

• Procedures for analyzing, investigating and resolving balances outstanding over a pre-defined number of days

23

As-Is and To-Be – Significant System Changes

AR process• Offline disparate systems

AR Process• Consolidated integrated across all modules

enabled with workflow

As-Is To-Be

24

Key Potential Development ObjectsName Description Implementation

Requirements Workflow (AR Entry/AR Invoice creation)

Within the General Accounting department, all billings must be approved and signed prior to being mailed to customer. This workflow will transfer the AR financial data to the AR Supervisor for approval.

Identify appropriate approvers and back up for approvers

Workflow (Write Offs)

This workflow scenario involves the AR clerk creating and parking a journal entry via T-code FV50. The journal entry will be sent to the AR Supervisor for approval. The final step involves the District AR manager receiving the workflow notification for approval. The document will be posted in the system once the District AR Manager approves (only amounts greater than $500 are work-flowed to District AR Manager)


Workflow (Credit Memos)

This scenario involves an AR clerk creating and parking a credit memo via T-code FV75. In order for the credit memo to be posted, the AR Supervisor will need to approve the credit memo. In order for the credit memo to be paid the District AR Manager will remove the payment block


25

Key Potential Development Objects (cont’d)Name Description Implementation

Requirements Generic Invoice Generic invoice is required for Client X. This form will be created

and will have several different standard text options applied dependent upon the condition/department, etc.

Need to analyze the various verbiage that is required by each department

Generic Cash Receipt

Generic receipt form is required for Client X. This form will be created and will have several different standard text options applied dependent upon the condition/department, etc.


Account Statement An Account Statement will be produced for Client X. This Account Statement may be used for all customers and may be generated periodically, i.e. monthly, quarterly, annually, etc.


Dunning Letter Generic dunning letter is required for Client X. This form will be created and will have several different standard text options applied dependent upon the condition/department, etc.


26

Proposed Customer Account GroupsThe following Customer Account Groups will be created for Client X

Account Type

Description Example Customers Est #

GNRL General customers of District, not related to Grants

Facilities, Risk Mgmt, General Accounting, Govt Affairs & Land use, Food & Nutrition etc

400

GOVT Governmental Bodies associated with Grants

Location Y Dept of Education, State of Location Y

50

Group X Internal Departments and Schools within Client X

Each location code within Client X 500

EMPL Employees of Client X Terminated employees (Implemented with SAP HR/Payroll)

N/A

GRNT Grant sponsor or grantor Customer account group covers all grantors

100

1TME One time customers, customers who return business is unlikely

Record donations to District 1

27

Support Required from Steering Committee• Enforcing the policy on completing a customer request form and submitting to the

Central Customer Master Data Unit• Support the policy of credit memo approvals and write-off approvals• Support General Accounting Department in developing dunning policies and

procedures. The General Accounting Department will act as a oversight committee to ensure collections policies are adhered to

• Assist in gaining District-wide acceptance for a standardized AR process, including billing, invoicing, receipts, collections and dunning

• Support of the policy for new approval processes

28

Implementation Challenges• Change impact upon various departments within the District in terms of requesting

customer master data to be set up within SAP• Ensure personnel are hired for the AR department and are assigned to Customer

Master Data creation and maintenance transactions• Impact upon various departments within the District in terms of receivables, as

receivables were never captured in MSAF. Departments will have to be increasingly cognizant of outstanding receivables and ensure they make a good faith effort to collect outstanding debt

• Ensure that relevant personnel attend the training provided in SAP FI-AR functions• AR billing will be a decentralized process, whereas the individual Departments will

have control over the creation of receivables and collections. However, receipts will be centralized. Treasury will post all incoming payments to cash clearing and the AR department within General Accounting will apply the cash and clear receivables

07 Accounts Receivable c

Documents