Magazine Article | May 1, 1999

Accounts Payable Department Drowning In Paperwork

Source: Field Technologies Magazine

Ugly Duckling Corporation, a $333 million used-car dealership, streamlines its accounts payable department by adopting a COLD and imaging solution.

Integrated Solutions, May-June 1999
Ugly Duckling Corporation's accounts payable department was not a pretty sight. "Thousands of invoices flooded the department each month, creating a paperwork nightmare for employees," explains Steve Geary, the company's management information systems (MIS) director. Ugly Duckling Corp. didn't want to hire additional staff. So Smead Manufacturing (Hastings, MN) provided a COLD (computer output to laser disk) solution to streamline the approval and reconciliation of invoices.

Ugly Duckling Corp. of Phoenix, AZ, (NASDAQ-UGLY), with 2,500 employees, operates 58 Ugly Duckling Car Sales dealerships in seven states. The corporation started in 1992 with two dealerships in one city. The dealerships specialize in "sub-prime" automobiles — used cars more than five years old — and targets customers who have blemished or limited credit histories. Ugly Duckling dealerships sold more than 36,000 cars in 1998 and reported gross sales of more than $333 million that same year.

Verifying Invoice Information Is A Tedious Process
Because Ugly Duckling sells used cars, the company spends money to repair and recondition cars prior to selling them. Invoices for repairs and reconditioning are routed from the company's 13 inspection centers to the corporate headquarters in Phoenix. The average car repair generates five invoices, creating the paperwork nightmare.

"The problem Ugly Duckling faced was the reconciliation of invoices with copies of the checks used to pay the invoices. With the paper-based system, invoices would be misplaced or lost," says Geary. "Reconciling invoices to the copies of checks paid to vendors was a tedious and costly process." Less than one year ago Ugly Duckling Corp. contacted Smead for an alternative to its paper-based system.

New Solution Incorporates COLD And Imaging
Ugly Duckling already had a relationship with Smead, having adopted its Smeadlink imaging solution in its loan processing department. "We were quite satisfied with Smead's capabilities, especially the company's support," explains Geary.

All the invoices for repair and reconditioning are preliminarily approved by managers at the inspection centers. The information from the invoices is then entered into an AS/400 AP (accounts payable) system, also referred to as CLASS (car loan accounting and servicing system). The invoices are then forwarded via fax to corporate headquarters for final approval and payment.

"A key part of our solution design was driven by our CFO, Steve Darak, and our imaging systems manager, David Rompalo. The solution was to apply a bar-coded reference label to each invoice. The reference numbers are then scanned into the CLASS AS/400 AP system," explains Geary. Invoices are then faxed from the inspection centers into a Smeadlink AP imaging application running on a Windows NT server at corporate headquarters. RightFAX software automates the collection and uploading of the faxed invoices into the Smeadlink database.

Ten accounts payable clerks use a Smeadlink work queue, based on the first two digits of the reference number, to approve and process invoices. "The clerks needed to view the Smeadlink database and data from the CLASS AP system simultaneously. To accommodate this need, we added an additional PC monitor with an Appian Graphics Dual Monitor Video Card. Now the clerks view the imaged invoice onscreen in Smeadlink and match it to the CLASS AP information. "Instantly, clerks can verify the vendor information entered remotely into the CLASS. They then compare it to the invoice and approve the invoice for payment," notes Geary.

"Another key aspect of the solution was to automatically extract and upload data, such as check numbers and the dates payments were made, from the CLASS AP system into Smeadlink," explains Geary. "The actual check file from the AS/400 is loaded into Smeadlink's COLD software. This enables users, especially management, to view a virtual copy of the check online."

Ugly Duckling Corp. is working with its bank to obtain electronic versions of its canceled checks to load into Smeadlink. "This will truly ‘close the loop' on our invoice payment process and provide the ultimate assurance that our vendors were paid," says Geary. "We are generating a number of reports that tell us what invoices are overdue. We can determine what work queues are behind or ahead, and whether we are paying our vendors on time," adds Geary.

Fine Tuning The Solution
Installation of the system company-wide took roughly five months, including full implementation at each of the 13 inspection centers and the central processing facility. The system, which cost $70,000, has been in use for approximately six months.

"System performance was initially a problem," says Geary. "The Access-based version of the software was occasionally somewhat slow for our clerks. It really bogged down the system when the application was accessed across our WAN (wide area network)," notes Geary. "The latest SQL server version of Smeadlink has solved this problem."

Faxing numerous invoices from the remote inspection centers also posed a problem. "Faxing a large number of invoices everyday is a cumbersome process. We are evaluating scanning alternatives to streamline this process as well," says Geary.

Geary says the new system will save the company more than $150,000 annually. This translates to an investment payback period of six months. The company is realizing the savings due to improved productivity, the elimination of manual tasks and the addition of an automated inquiry process. "We've also virtually eliminated the invoice file room from our corporate headquarters by electronically storing invoice and payment information," notes Geary. "The invoice flood is gone and the paperwork nightmare is over."