LSE : FINANCE DIVISION

Accounts Payable Annual Report 2017/18

Version 1.02

London School of Economics and Political Science

06/12/2018

Purpose: This Report aims to identify the key challenges faced by Accounts Payable (a section within the Finance Division) in early 2015, the objectives that were established, and the level of achievement attained to date.

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Contents Background ............................................................................................................................................................... 2

Executive Summary ................................................................................................................................................ 3

Team Motivation & Performance ...................................................................................................................... 5

What We Have Achieved ....................................................................................................................................... 6

App I. AP Team Structure FTE [as at 25.09.18] ............................................................................................ 7

App II. Overall AP Customer Survey Results - August 2018 ..................................................................... 7

App III (a): AP Customer Survey August 2018 – Statistical Detail ......................................................... 8

App III (b): AP Customer Survey August 2018 – Areas for Improvement ........................................... 9

App IV (a): Purchase Invoice Process Trend (Volume) ........................................................................... 10

App IV (b): Purchasing Card Spend Analysis Aug 2017 – July 2018 ................................................ 11

App V: Average Payment Days by Business Area as at 31.07.18 .......................................................... 12

App VI: Query Handling Trend from 01.08.17 to 31.07.18 ................................................................... 13

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Background

Accounts Payable (AP), a service section within the LSE Finance Division, is dedicated to ensuring that properly

authorised non-payroll expenditure incurred by the School is paid accurately and in a timely manner. As required by

the School’s Financial Regulations, financial controls, operational controls and accounting standards the Team’s

activities follow routines which create audit trails and require separation of duties.

By the nature of its activities, Accounts Payable has relationships with all departments* in the School and the many

hundreds of the School’s suppliers. As a result, the AP Team has to respond to changes in priorities and urgencies.

The School is organised into two areas of focus: academic programmes and research projects, with professional

service functions managing a number of cross-School activities such as Human Resources, estates management and

the Finance Division. The School maintains an international outlook and a cosmopolitan student body, drawing staff

from over 85 countries, students from over 140 counties worldwide, as well graduates in overseas placements. This

make-up necessitates not only UK payment requirements but also increasingly an international payment need.

As well as the diverse nature of the student body and School functions, the Team is further challenged by the growth

in the School’s estate, building works, summer schools and growing international activities.

The School makes the use of a number of payment methods and facilities which allow a large degree of flexibility

for staff whilst maintaining tight financial controls. The primary method is UK BACS and we also use cheques and

overseas bank transfers mainly through Cambridge Mercantile. Barclaycard Purchasing Cards are also available for

frequent travellers and small value procurement.

The Accounts Payable Strategic Review in 2015 was the catalyst for a communication strategy to engage customers

across the School. The AP Customer Survey conducted in April 2015 was followed up in April 2016, April 2017 and

August 2018. The majority of customer recommendations for improvement have been addressed.

* Footnote: This document uses ‘departments’ to represent all combinations of academic units, research centres and service areas across the School

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Target Service and Systems

Improvements

Implement Improvement

Plans

Seek Customer Feedback

Executive Summary

Opening Challenges The AP Customer Survey in April 2015 set the agenda for AP improvements.

The major objectives were:

More regular communication of payment runs, process changes and system development [AP Bulletin ]

Review and revise AP User Guide and Travel Expense Guide [ See updated AP Webpage]

Improve response to urgent payment requests [ See AP responses -App III (b) ]

A clearer idea of who’s who in AP and their roles [ See AP Team Structure - App I]

Relaunch of IssueTrak to improve the customer journey and increase the customer base [ See App III(b)]

See also section on “What We Have Achieved” and “Overall Customer Survey Results -App II”.

Major Initiatives In order to address those challenges, the initiatives developed can be summarised as follows:

Continued regular reporting of payment run timetable (as well as delays) and initiatives through AP Bulletins

and Academic and Service Forums

Advise customers in how to minimise the need for urgent payments, essentially through pre-planning and

engaging the assistance of Finance Managers. Also clarification of the route to take for urgent payment

requests

Publication of the latest AP Structure Chart ( see App I )

Installation an additional scanner to increase scanning efficiency

Achievement in 12 Months

The result of the AP Customer Survey conducted in August 2018 returned a fall in customer satisfaction by 11 points

to 87%. A significant indicator for customer satisfaction is response time to queries. The peak performance was

achieved in 2017 when 79% of respondents experienced 1-2 days response time. Customers have experienced fall to

53% (see chart below).

The major contributory factors to the results are staff turnover and system faults affecting payment runs.

A more analysis can be found App III (a) and AP’s response to Customer feedback, App III (b).

The measure of improvement is best expressed by quoting feedback:-

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CUSTOMER FEEDBACK

AP is a valuable resource and the team have a challenging role given the

School's aged infrastructure and customer expectations in an online world. Most public sector organisations now have paperless, online processes

which I assume will come with the introduction of new finance system .

This may trigger the cultural change around AP's processes and procedures so that they are better aligned to the customer and end user.

AP RESPONSE

This feedback alludes to the new finance system project,

OneFinance which is already in progress. We are currently at the Business Process Review and

Validation stage that will require collaboration Schoolwide.

More detailed information will be released in due course.

Purchasing Cards At the beginning of 2016, the Finance Division piloted the use of Barclaycard Purchasing Cards (Pcards). The

scheme has now been rolled out Schoolwide with over 170 Pcards in circulation. This included converting over 40

HSBC Executive cards to Pcards. This involved developing training material for a weekly training programme for

new cardholders to address this procurement shift. We have also seen the growth of the use of Diversity Travel, the

School’s preferred Travel Management Company.

Travel Management Account (TMA) – streamline the interfacing of Diversity Travel transactions to Aptos,

thereby reducing processing time.

Precisionpay Pilot – Barclaycard’s virtual purchasing card portal, providing the facility for online

purchasing to departments that may not qualify for a Pcard. This will be more feasible to roll-out as part of

the OneFinance project.

Looking Ahead

The major AP benefits that can be anticipated from the OneFinance Project can be summaries as:

More efficient payment runs for suppliers and staff expenses

On-line expense claim ( on all devices) for staff and non-staff

On-line access to invoice status enquiry for both purchasers and suppliers (reducing queries)

On-line purchases requisitions with access to supplier as well as internal catalogues

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Team Motivation & Performance

Team Motivation

In relation to staff turnover, it could be described that AP are victims of their own success. Having trained and

developed a peak performing team, individuals have taken the opportunity to use this as a platform to further their

career. The challenge is therefore to develop and document systems and processes that can address staff training and

up-skilling. Always maintaining the following team building components:

o Flexibility – willingness to increase individual skill sets to prepare for role rotation, and cover.

o Performance – the importance of maintaining consistency, quality and regular attendance.

o Measurability – defining acceptable standards of performance in order to monitor and compare

individual achievements against agreed expectations

Team Performance Invoice Processing (App IV)

The overall level of purchase invoices processed (excluding Pcard) has reduced by 4.9% over the last 2 years from

64.9k to 61.7k (see App IV (a)). The major contribution is the reduction in UK supplier invoices driven by the

switch to Pcards, in particular for travel and subsistence. Diversity Travel Pcard transactions have seen a volume

increase of 4.5K (see App IV (b)). Staff Expense claims has increased by 8% (from 10.5k to 11.4k) over the last 2

years and 22% over the last 6 years. Our foreign exchange provider, Cambridge Mercantile continues to deliver a

reliable settlement service for our foreign suppliers with a marginal increase in volume.

Payment Days (App V)

The length of payment cycle currently averages 30 days which is a significant improvement compared to 3 years

ago (39 days). Over that time we have seen the delivery and approval process time reduce from 30 days to its

current 21 days. Once received, the AP team then takes an average of 9 days to process invoices to payment. We

have used the Aptos 10 upgrade as an opportunity to have a tighter timetable for payment runs to improve payment

reliability. However software bugs have hampered a number for payment runs. We have worked closely with the

software provider to resolve the major issues.

Query Management (App VI)

Account Payable queries captured in IssueTrak have allowed us to plot the volume growth over the last 12 months.

This increased from 250 in August 2016 to nearly 450 at its peak in November 2017. This can be explained by the

following:

Relaunch of IssueTrak, making it more accessible to a wider customer base by allowing issues to be logged

by simply sending an email rather than having to login to IssueTrak.

Staff sickness absence leading up to the year-end.

Year-end query impact.

However, the chart shows that after the year-end closed, staff have able to address the backlog. However the level of

queries has shown as steady rise to 450 per month. Consequentially, outstanding queries have increased by 28 year

on year.

Outstanding queries as at 31st July 2018:

2015/16 2016/17 2017/18 Movement

Normal queries 58 66 106 +40

Approval request 121 46 34 -12

Total 179 112 140 +28

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ITEM

Objectives 2016/17 What We Have Achieved

Customer Satisfaction

Rating

1.

Greater attention to

detail

Scanning of documents to be viewed in Statements 5

Setting up supplier bank account details

Invoices overlooked at Schedule For Payment (SFP)

status in Aptos

More accurate payment runs

85%

2. Improved response to

urgent payments

We have introduced to alert AP to address urgent

requests.

73%

3. Internal

Communication Wider distribution of AP Bulletin with alerted the

School to anticipated payment delays.

However sporadic system faults delayed some

payment runs

67%

4. Maintain the

AP webpage

The new AP webpage was delivered with refreshed content

hyperlinks to essential reference documents, especially in the

following areas:

Procedures and policies

Payment timetable

Who’s who in AP

FAQs

81%

5. Roll-out and

Administration of

Purchasing Cards

This includes the implementation of Barclaycard’s Travel

Management Account (TMA) which streamlined the

processing of Diversity Travel e-Invoices.

92%

6. Other Systems The fall in the satisfaction rating for IssueTrak has been mainly

due to the AP team staff turnover and IT failures. With a more

settled and knowledgeable them, this should improve.

34%

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App I. AP Team Structure FTE [as at 25.09.18]

App II. Overall AP Customer Survey Results - August 2018

Quality of Overall AP

Service

Respondents Rating for 2014/15

AP Customer Survey

Respondents Rating for 2015/16

AP Customer Survey

Respondents Rating for 2016/17

AP Customer Survey

Quality of Overall AP

Service

Respondents Rating for 2017/18

AP Customer Survey

Excellent 7%

6%

24%

Excellent 7%

Good 15% 49%

33% 80%

54% 96%

Good 47% 87%

Satisfactory 27%

41%

18%

Satisfactory 33%

Poor 41%

16%

4%

Poor 13%

Very poor 10%

4%

0%

Very poor 0%

100%

100%

100%

100%

Number of Respondents: April 2015 = 41 April 2016 = 51 April 2017 = 29 August 2018 = 30

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App III (a): AP Customer Survey August 2018 – Statistical Detail Service Experience Percentage of Respondents

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App III (b): AP Customer Survey August 2018 – Areas for Improvement

Item Customer Feedback AP Response

Supplier Payments & Expense Claims

1 There were often unexplained delays to supplier payments and

reimbursement claims. These were pushed back without any information or warning. It was also not clear why staff expenses claims were

processed weeks after they have been submitted, usually taking a month.

We us the AP Bulletin to alert the School to anticipated extensive delays

to payments. Unfortunately we have experienced sporadic system issues which can slip the payment run by 2-3 days. We have been working

closely with the Aptos suppliers to resolve these issues.

Expense claims process includes line manager approval followed a stringent AP compliance checks. This could include referring back to the

claimant if there are any concerns or need for clarification.

2 They also never provided us with the Club Quarter's (CQ) invoice for

guest stays at the hotel when CQ would invoice Finance directly - often

we had to either follow up with customer service at CQ directly, or wait for someone from AP to respond via IssueTrak.

We also experience delays receiving CQ invoices.

Once received, there should be an immediate forwarding of the invoices

via IssueTrak having established the departmental contact. This process assists us in keeping track of all CQ invoices received.

3 The question I ask most often is when is an invoice or expense claim going to be paid? There must be a means whereby we can find this

information ourselves, without always having to ask. BTW, whenever I

do ask the answer is always "next week".

Aptos is limited in providing such information readily. However this is a functionality specified for the new finance system, “OneFinance”. This

is also specified for our suppliers which will significantly reduce the

number queries received by the AP Customer Service Team.

4 Travel Expenses: updated allowances, process moved completely online.

Supplier Payment: Automate more systems and use more electronic

submissions, but with a modern system.

These are functionality specified for OneFinance.

Staffing

5 Service level is OK. However, it’s often not clear who one contacts

though if there is a query especially if there’s an urgent query.

Regular queries are best address to Lse.finance.payments@lse.ac.uk

Where it can be picked up and handled in IssueTrak.

Urgent request should be submitted to Ben Hancock (Head of Payments).

6 Regular staff turnover. The nature of the role means that ambitious staff us it as a springboard to

further their career. Our challenge is to minimise the impact of staff changes and lost efficiency through selection and training.

7 A more consistent level of service would be a positive improvement,

with all staff demonstrating and the ability to problem solve and communicate effectively.

The is certainly an AP objective.

Barclaycard Spend Management (BSM)

8 Notifications always going to spam. Forgotten password locking me out. By move any BSM emails from the Spam folder to Inbox (or classify as not spam) will rectify this concern.

BSM have a forgotten password option which sends instructions fro re-

setting to your mailbox.

9 When transactions are mislabelled vatable or non-vatable, would it be

possible for staff in AP to re-label them correctly? This may save time.

AP fulfilled this function when volumes were lighter. With increased

volumes this is an accounting requirement that’s best placed with the

cardholder and will also be essential in OneFinance.

IssueTrak

10 It would be helpful to have a quicker turn around for queries marked

urgent. Sometimes they took 3-4 days. However, once a response has been given, most occasions it has been resolved well.

We will look into the reporting functionality of IssueTrak that enables

prioritisation of issues. Our target SLA is 1-2 days. This has not been achieved as well this year because of a significant turnover in the

Customer Service Team

11 I've had cases where requests in IssueTrak haven't been replied to for

weeks. I've followed this up with an Outlook e-mail which did get replied too much more quickly.

Issue resolved by Customer Service Team has grown to over 400 per

month, peaking at 500. Outlook does not have the level of functionality to report, analysis and track that such volumes of queries as AP

experienced in the past.

IssueTrak was always intended to be an interim solution. The specification for OneFinance is online access for:

Purchasers to view payment status of their invoices

Suppliers to have a portal to view status of their invoices

12 AP staff appears to be more concerned with closing down the request on

the system to meet an SLA, than actually dealing with your request or

trying to refer the enquiry elsewhere.

13 IssueTrak is a useful tool but too much unnecessary detail on communications often leaves recipients confused as to the actual

message.

14 There is an assumption that the user is familiar with accounts payable terminology/ jargon in order to select the right enquiry type.

15 Too many e-mails, format not readable & not easy enough to access attachments. I'm often not allowed access to information I need due to

permissions (as I am a delegate of the budget holder).

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App IV (a): Purchase Invoice Process Trend (Volume)

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App IV (b): Purchasing Card Spend Analysis Aug 2017 – July 2018

Value Analysis by Expense Category

PCARD

TRANSACTIONS 2015/16 2016/17 2017/18

INCREASE

Volume £'000 Volume £'000 Volume £'000 Volume £'000

Lodge Cards

Travel & Subsistence 438 £172 4,041 £1,641 4,542 £2,204 501 £563

Office Equipment &

Stationery £160

£305

£299

-£6

Visas ( Home Office) £98

£175

£132

-£42

Catering Costs

£17

£25

£8

Laser Energy

£1,392

£1,392

Cardholders 1,138 £142 6,111 £711 9,216 £1,209 3,105 £498

TOTAL PCARD SPEND 1,576 £572 10,152 £2,849 13,758 £5,261 3,606 £2,413

Number of Cardholders 46

153

170

17

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App V: Average Payment Days by Business Area as at 31.07.18

Number of Invoices Processed

2016/17

2017/18

Movement

Cost Centre Hierarchy L1 2016/17 2017/18

Days to Receive

Days to Process

Payment Days

Days to Receive

Days to Process

Payment Days

Days to Receive

Days to Process

ACADEMIC

DEPARTMENT 10,650 10,723

16 8 24

14 8 23

ACADEMIC OTHER 4,203 3747

21 8 30

20 7 28

APCC AREAS 767 724

27 8 35

18 9 27

CONSULTANCY 3958 3485

19 10 30

21 12 33

ESTATES 5,548 6330

29 10 39

31 10 41

IMT 2,436 1932

20 8 28

18 9 27

INSTITUTES 946 1036

17 9 26

16 10 26

OTHER ACADEMIC

UNITS 679 667

19 8 27

12 9 21

PROFESSIONAL

SERVICES 6,273 5210

22 8 30

24 9 33

RCSD 18,351 18216

24 11 35

23 10 33

RESEARCH 2,623 3127

20 8 28

19 9

28

RESEARCH CENTRE 3,629 2417

23 8 31

21 9 30

Overall Average

Payment Days

22 9 31

21 9 30

KEY:

Payment Days = Days between Invoice Date and Payment Date

Days to Receive = Days between Invoice Date and the date received in Accounts Payable

Days to Process = Days between date received in Accounts Payable and Payment Date

Commentary

Payment Days (30) down by 1 Day

The average number of days it takes for a supplier invoice to be settled, from the invoice date to the payment

run date.

Days to Receive (21) down by 1 Day

Represents the proportion of the average payment days which is out of control of the Account Payable section.

This will cover external and internal postage time as well as the time it takes for each department to check,

budget code and sign invoices that are submitted to them for authorisation.

In the case of the Estates Division invoices this will also include the time taken to process invoices on Planon

(Estate’s planning system).

Days to Process ( 9 ) nil change

Represents Accounts Payable’s average processing time for supplier invoices; from time of receipt and entry

to the finance system to time of payment run.

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Commentary: Rising trend in queries is indicative of increased users of IssueTrak, payment run system issues , having a knock-on impact on Response Time.

App VI: Query Handling Trend from 01.08.17 to 31.07.18

2015/16 2016/17 2017/18

Average Issues Opened per month 270 301 375

Average Issues Closed per month 255 296 370

Issues @Bottlenecks:

Pending – Issues not yet allocated or started 6 3 10

Awaiting Approval from department 121 46 34

Awaiting Bank’s Response

2 1

Awaiting Supplier’s Response 7 10 4

Scheduled for Payment 14 10 61

Requesting more info from Submitter

8 17

Total Issues @Bottlenecks 148 79 127

Soft Close –Awaiting submitter’s confirmation 7 23 2

Issues in progress 24 10 1

Total Open Issues as at 30th September 179 112 140

0

100

200

300

400

500

600

Issues Opened

Issues Closed

O/S Issues @Month-End