Enhancing control and lowering costs through payables outsourcing.

• Author: Longhi, Michael
• Position: Enterprise resource planning

Payment production is no longer a physical task within the Arlington County treasurer's office--payables outsourcing has moved a manual process to a Web-based environment. The county had considered moving away from in-house check preparation in the 1990s, but when the idea came up again in 2005, several factors came together to make such sweeping organizational change possible.

Any project of this magnitude must start with a clear assessment of the organization's current situation and future goals. In Arlington County, one of the primary challenges was that the existing in-house check printing software was no longer supported by the vendor, and the physical equipment had exceeded its useful life. At the same time, both the Arlington County government and public schools system decided to implement separate enterprise resource planning (ERP) systems to replace their general ledger, personnel, and payroll processes. These legacy systems were going to be dismantled during the second and third quarters of 2006. Additionally, continuity of operations planning (COOP) had been a particular area of concern after the terrorist attacks in 2001, since Arlington County is the home of the Pentagon, and many of the requirements for payables outsourcing fit seamlessly into best practices for COOP

PROBLEMS TO BE SOLVED

Having decided payables outsourcing was the answer, the county needed to create an automated disbursement process for six areas: county accounts payables, county payroll, the department of human services, treasurer's refunds, school payables, and school payroll. Each department had specific disbursement features and functions they required or preferred, and delineating the difference between required functions and preferred options required many detailed discussions. The treasurer's office--which is responsible for receiving all funds, ensuring the collection of delinquencies, managing banking, cash, and investments for funds associated with the county government and public schools, and disbursing these funds--wanted to support decentralized processing, but not at the expense of liquidity management or audit and accounting standards. In the end, the new process needed to accomplish several goals:

* Work with the stand-alone ERP systems used by the county and schools.

* Improve bank account reconciliations by using the bank-provided automated reconciliation system to clear paid items. Not having to manually process the clearances is a considerable time saver when 123,000 checks are produced each year.

* Enhance fraud prevention by using the bank's positive pay, payee match service. The service matches the check number, check amount, and payee name on any check presented for payment against the data the bank was given to produce the checks. This step ensures that only checks properly written on the account can be cleared for payment.

* Implement automated clearing house (ACH) controls so transactions are reconciled automatically, thwarting any outside attempt to place an ACH debit on any of the treasury's accounts. ACH controls streamline the routine ACH payment information through the same process departments use in requesting a check.

* Reduce workloads involving abandoned property that is returned to the state, or escheats. Easing and therefore increasing use of ACH disbursements is one way of achieving this goal.

* Capture significant savings by decreasing the administrative burden and costs associated with generating checks in house on aging equipment.

* Eliminate the administrative burden and cost of fulfilling manual or "hand-cut" checks by eliminating the timing need behind most of these requests.

* Provide a safe and secure processing environment with complete disaster recovery redundancy

* Give the treasurer's office, various county departments, and the schools access to the best disbursement practices and the timeliest information available by providing online access for certain actions within the specific bank accounts related to their areas.

* Be ready on schedule. The timing from initial involvement to implementation was critical because there would be no backup system available. Neither the county nor school ERP installations could be connected to the old process, so the new one had to work from the outset.

Culturally, this change had a substantial impact. Within the treasurer's office, staff went from physical control of checks to watching data move on computer screens. When the check production equipment was located in the county's network operations center, a staff member had...