In this blog article we show how Palette’s software with purchase to pay controls makes a difference to the Controller in an automotive manufacturing firm. This article is part of a series that highlights how the Palette platform can impact all of the people purchasing and invoice processing touches, empowering roles in the organization with transparency and accountability.
As a plant controller, you’re responsible for the financial performance of your plant. You spend much of your time creating or modifying budgets based on meetings with department managers and your plant manager.
Those budgets are used to measure performance for each financial period, as well as the overall year-end totals. You have weekly meetings to make sure you know what is happening within the plant, which presses are down, what additional staffing needs are, and more.
You create estimates to give your CFO when you’re worried about the danger of going over budgeted amounts.
You have an understanding of what parts are being manufactured. You know the profit margin of each job, as long as the job is running in the press it was calculated to be manufactured in – also known as the burden rate (the burden rate is the allocation rate at which indirect costs are applied to the direct costs of either labor or inventory).
When disruptions occur, it is likely that you are included in meetings where decisions are being made but it is also possible that you are not included – a very common occurrence. You often learn about situations after they’ve been resolved. That’s when you get a report on how much the issue cost the company.
One of your biggest frustrations is that you are not part or privy to any of the financial transactions for your plant. All direct material purchases are initiated from the purchasing and materials departments, and the indirect material purchases are handled at the plant level. You are not always made aware of the indirect purchases – even when you should be.
Your signature is not required because it carries no financial authorization. This means that you have 100% responsibility and 0% authority where spending is concerned.
You have a process that you follow at month end. This process includes verifying the activity in your GL accounts. The problem is you can only see the posting. You can’t see the detail or the invoices that generated the posting. You create a list of all of the invoices that you need pulled, scanned and emailed so you can confirm that the correct GL account was used.
You also need to know what is included in the accrual posting for your locations. This is problematic because you are not the person that generated the accrual posting. The posting is comprised of spreadsheets that are a listing of all the invoices that are sitting in AP at the corporate office. You request a backup for the journal entry so you can better understand what is actually being accrued.
A purchase requisition workflow gives you the opportunity to be part of the conversation around each and every purchase.
Your signature isn’t needed for approvals on the purchase requisition, but you are ultimately responsible for the spend. You set specific scenarios where you’re added to the approval process – bringing you into the financial transactions and decisions when you need to be.
There are no surprises because you can see all of the transactions concerning your area of responsibility. You stop looking at “what happened” and start working on “what is happening” in real time.
“Accrual reports are readily available. That includes the details of what makes up the total, complete with the invoice information.”
Month end reporting is faster and saved and/or exported to Excel for further analysis and/or audit purposes. You run reports throughout the month and monitor the remaining amounts on your budgets as the month progresses.
When you are reconciling your GL accounts at month end, you don’t need to rely on AP (or any other departments) to pull invoice copies to verify all of the charges in your GL accounts.
This series is excerpted from our Whitepaper on the Benefits of Purchase to Pay.