Innovations in AP for Community Association Management

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Innovations in APAccounts Payable tools available today that

help Managers and alleviate risk concerns for Boards.

• 3 years as Strongroom CEO

• Formerly VP of Operations for Medical Software Company

• Former Executive of Financial Firms Working with Banks

• MBA, University of Chicago

• BA, Indiana University

• Cherishes his “80’s Hair Bands” on his Ipod while running!

Tyler Gill

Web: strongroomsolutions.com

Twitter: @payableslockbox

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Session Agenda

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

1. Making Managers Jobs

Easier in Accounts

Payable (AP)

2. Providing Financial

Security in Accounts

Payable (AP) for my Board

Members

Making My Management Job Easier

Why is Accounts Payable (AP) so problematic for Managers and what innovations are available to

help?

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

1

Tech Innovations in the CAM Industry Today

Receivables • Lockbox – Outsourced

Billing• Online Payments• Remote Deposit Capture

Compliance and Maintenance

• Online Deed Restriction Tracking

• Automated Violation Letters

Association Websites• HOA Documents• Board Member Access• Online Service Requests

Work Order Management• Online creation of work

orders• Simplified communication

to vendors

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

What do ALL of these innovations have in common?

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

What do ALL of these have in common?

• Streamline traditionally PAPER-based processes

• Provide options for complimentary OUTSOURCED services

• Provide online, anywhere, ANYTIME access to data

• INTEGRATION with other systems

What is Accounts Payable (AP)?

Definition according to Miriam Webster: • Any amount owed as the result of a purchase of goods or

services on a credit basis.

Definition according to a Community Manager: • The pain in the !@#$ task that sometimes impacts my

ability to provide exceptional service to the Associations I manage!

Why can it be painful?• The Manager has been tasked with performing too much

AP… OR

• AP staff is controlling too much of the AP process, and the Manager’s visibility into their Association’s AP is minimal.

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

The Simple Definition of AP

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Vendors Send Invoices

In-House Approval

Bill Payment

Easy ….. Right?

Wrong! The Real Definition of AP in HOA Management…

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Various Invoice Formats

Many Vendors

Record Keeping?

Vendors Send Invoices

Approvals Bill Payment

Different Payment Options

End of Year Reporting

Security

Multiple Approvals

Boards at Different Locations

Signatures?

??

?

?

? ?

AP Lockbox – Invoice Processing Innovation

• Paper Invoice Scanning:

• High-Volume Color Scanning

• Leverage economies of scale with outsourced services

• Emailed Invoice Processing:

• STP (Straight-Thru Processing) of Invoices to centralized email address

• QR Code ‘split’ technology for splitting invoice documents

• Vendor Portals:

• Vendors submit invoices directly through the buyer’s site

• Vendor can check status of invoices, sign up for electronic payment, etc.

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

AP Lockbox – Invoice Processing Innovation

• Invoice Data Extraction:

• Streamlined keying solutions for quick, validated, auto-fill entry of standard invoice data elements.

• Solutions that utilize OCR technology to extract standard invoice data elements.

• Services that leverage economies of scale and provide savings to customer.

• Defaulting Functionality:

• Solutions that allow for auto-populating certain fields such as line item memos, invoice description and due dates.

• Some accounting systems provide some level of functionality here, and many 3rd party AP solutions provide these capabilities.

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

AP Automation – Invoice Approval and Auditing Innovations:

• Online invoice review & approval:

• Access invoice images and invoice data anywhere, anytime.

• No more chasing the paper trail.

• Invoice Storage and Archiving:

• Cost of paper storage removed.

• Online solution should have long term invoice archive (7+ years).

• Transparency and Audit Trail:

• Ability to see all approvals and edits of invoices by user and date/time.

• Dashboards that provide visibility into delays in approval.

• Ability to create exportable archives for transfer of data to auditors.

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Invoice Approval and Auditing Innovations:

• Conditional routing of invoices:

• Ability to get required number of approvals before invoices are paid.

• Technology should provide a variety of ways to configure conditional routing (by vendor, vendor type, bank account, dollar amounts, GL codes, etc.)

• Conditions should accommodate approval needs as required by state regulation (ex. dual board approval for reserve expenditures.)

• ‘Searchability’:

• Ability to quickly access invoice documents across a variety of criteria.

• Ability to generate reporting that contains invoice data and images.

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

AP Payment Innovations:

Online Payment Approval:

• ‘Online Bill-Pay’ which sends check or pays electronically

• Ability to actually see invoice image prior to approving for payment

• Ability to draw funds on Association accounts (vs. being ‘pre-drawn’ to supply a holding account.)

• Ability to add ‘digitized’ signatures to checks.

• Ability to see account balances prior to approval.

• Ability to set up multiple bank accounts and schedule a payment date.

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

AP Payment Innovations

Multiple Payment Options:

• Pay vendor by Check or ACH

• Automated ACH transmission to bank

• Card transactions with rebates (Coming!)

• Early pay discounts and dynamic discounting (On the way!)

• Getting rebates or achieving early payment discounts provides potential new differentiating service and revenue

• Ability to pay with card and achieve early pay discounts will be important parts of your business in next 5 years…

Other Industries – Usage of AP Automation Technologies

From January 2014 Paystream Advisors Study

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Data Integration Innovation

Integrated Systems– Avoiding Dual Data Entry:

• ‘Online Bill-Pay’ has traditionally limited integration to accounting system (no vendor import, GL coding, invoice import).

• Look for solutions that provide ability to import vendors and GL accounts from accounting system.

• Look for solutions that can integrate invoice and payment data back to accounting system.

• Some integrations may be automated or achieved through file downloads/uploads.

• Some integrations may allow for integrating account balances as well as invoice images.

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Providing Financial Security to My Boards

What are the risks in Accounts Payable and what innovations are available to address those

problems?

2

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Disputed Invoice Example

HOA likely on HOOK for unauthorized bill

• A community has a unit that was in escrow and suffered interior water damage after the tenant died.

• The management company hired a contractor to do mold remediation and repair structural damage without consulting the board.

• At a Board meeting, the manager presented the board with an $18,000 bill that was refused in an insurance claim.

• Expenditure limits were in the management contract; however, there are loopholes that could put the Association on the hook for expenses in ‘emergency’ situations.

• Examples like these are one of the reasons Board’s are requesting more oversight into the expense approvals for their Associations.

March, 2013

From:

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Manager Fraud Example

NO RESTITUTION for HOAs after million-$$ theft

• A Katy, TX man heads to prison for stealing more than $1 million from more than a dozen homeowners Associations

• Unfortunately, no restitution for the HOA’s, a Fort Bend County prosecutor said.

• Taggert Michael Mayfield, 34, pleaded guilty to theft, money laundering and misapplication of fiduciary property, and was sentenced to 35 years in prison on each count.

• Prosecutors said that between 2007 and 2011, Mayfield stole the HOA funds through his company, Arrow Management Company, which managed homeowners associations in Fort Bend and Harris Counties.

“Mayfield hid his crimes by falsifying reports he made to his clients, but one homeowner’s Association became suspicious and filed a complaint with the Fort Bend County District Attorney’s Office.”

Taggert Mayfield (Fort Bend County DA)

June 12, 2012From:

From HOAleader.com, March 2011:

“HOA Finances: 5 Signs of Fraud or Financial Sloppiness for HOA’s”

1. Checks written to individuals, not the Association...

• Solution: Require use of Lockbox for receivables.

2. Big decreases in revenue…

• Solution: Independent audit to ensure all money coming into Association is going to Association

(ex. Board member siphoning money to unknown Association account).

3. HOA checks are made out to Association members…

• Solution: Limiting check writing capability to an AP Lockbox solution which can provide approval

or read-only permissions to the HOA Board Members.

4. New vendors or big price increases for current vendors…

• Solution: Visibility into new vendors, prior invoices, and new invoices (AP Lockbox).

5. Fees paid to unqualified service providers…

• Solution: Strict vendor management process with insurance requirements prior to vendor

payment (internal policies and AP Lockbox).

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

There are risks in this paper based process…

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Various Invoice Formats

Many Vendors

Record Keeping?

Vendors Send Invoices

Approvals Bill Payment

Different Payment Options

End of Year Reporting

Security

Multiple Approvals

Boards at Different Locations

Signatures?

??

?

?

? ?

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Risks at Step 1 of the A/P Process:

Various Invoice Formats

Many Vendors

Record Keeping?

• Financial Risk in AP Processing

• Overcharging by Vendors

• New Vendor Audit?

• CPA or 3rd Party Audit Ready

Vendors Send Invoices

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Risks at Step 2 of the A/P Process:

• Financial Risk in AP Processing

• Approval Process?

• Boards Cannot Approve

• Lack of Audit History

Approvals

Multiple Approvals

Boards at Different Locations

Signatures?

??

?

?

? ?

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

More Financial Risks

• Financial Risk in AP Processing

• Unsecured Check Stock

• Unsecured Bank Account #’s

• Checks in Motion

Bill Payment

Different Payment Options

End of Year Reporting

Security

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

How can your Management Co MITIGATE these risks?

• Utilize an AP Lockbox

• “Lockbox … for Vendor Invoices”

• New Vendor Controls

• Single Entry Point for Invoices

• Anytime, Anywhere Invoice Access

• Full PDF View of Invoice

• 7 years of Storage (SOX)

Centralize

AP Lockbox receives, standardizes and extracts data from incoming invoices.

All Invoices

Scanning Coding

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

How can your company MITIGATE these risks?

• Utilize Online AP Automation

• Secure Login to Online System

• Full PDF of Invoices for Approval

• Roles Based Permissions

• Simple Approval for Boards

• Historical Audit Trail

• Vendor History

Automate

Users login to secure online workflow system to make necessary invoice approvals for payment.

Approver 1

Approver 2

Approver 3

Online Software

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

How can your company MITIGATE these risks?

• Utilize Automated Payment Disbursement

• Check Processing Removed from Office

• No Checks in Motion to Boards

• Full Audit of Check Payment

• ACH (Mail Risk)

• Payments Sent Daily (No Batches)

• Integration with Accounting System

Pay

After all required approvals are made, payments are sent by Check or ACH.

ACH to BankCheck Sent

Online Software

Recent Legal Proceedings for HOA Communities…

Themes in Nevada Legislation:

• Third Party Audits of Fiscal Statements

• Access to Information by Homeowners

• Suitable time frames for the Information

Themes in Texas Legislation (HB 2761) :

• “Expands access to an Association's books and records. If an Association cannot produce required records within 10 days of receiving a request, it must give the requestor a date within 15 business days by which the information will be available.”

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Transparency … Transparency … Transparency

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Summary

Your Boards are more informed than ever...

What assurances can you provide them that concerns with AP are addressed?

>Board’s

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

AP Lockbox, AP Automation and Automated Payments!

(Value Proposition):

Management Co

Controls & Security

Transparency with Audit Trail

Labor Cost Reduction

Late Fee Reduction

Scalability

Improved Board Relationship

HOA Board

Controls and Security

Transparency with Audit Trail

Time Flexibility

Late Fee Reduction

Budget Clarity

Improved Mgmt Co Relationship

Next-Gen AP Tools that Reduce Cost and Alleviate Risk

Strongroom Solutions, Inc. FAQ’s:

• Founded 8 years ago

• 200+ Management Companies Nationwide

• Headquartered in Houston, Texas

• Works closely with Association Banking Partners

• Integrated with HOA industry Accounting systems:

C3 Software