Measuring the efficiency of a payment system in dollars and customer service.

• Author: Busbice, Susan

An indexing system for accounts payable devised by staff of the City of Lubbock, Texas, provides benchmarks that are used to measure the efficiency of the, payment system in quantifiable terms and to identify problem areas.

Several years ago, the manager of working capital and cash systems for Occidental Petroleum Corporation wrote about the accounting theory behind indexing disbursements from the firm's accounts payable system to identify weaknesses and improve cash flow. A system so streamlined and effective produced envy among the City of Lubbock's accounting staff, who were struggling with a variety of payment system problems that kept the department in a daily reaction mode to seemingly endless issues.

In Lubbock, the problems ranged from slow citywide receiving procedures and inefficient software to hundreds of invoices needing to be entered daily. At times, the task seemed overwhelming for everyone associated with accounts payable. To alleviate the problems, the staff was determined to find ways to measure not only their internal performance, but the effectiveness of the overall payment system and its contribution, or lack thereof, to cash flow and cash management.

The Challenge to Change

The city had rarely been current with its expanding $136 milion accounts payable workload. A seasoned staff of three people was not able to get the accounts payable backlog under control and stay consistently current. Receiving scores of shipments on a cumbersome mainframe system with decentralized procedures was difficult and frustrating. Keeping up with thousands of invoices monthly and paying them timely was a challenge.

The largest problem seemed to be isolating a starting point in the midst of confusion. Over the years staff had grown accustomed to the stress of their workloads and had simply accepted the difficulties as necessary. Accounts payable data entry staff turnover was high and there was a strong resistance to change, for fear that change would result in more work and more stress. But management believed that answers could be found by resolving the underlying problems resulting in the loss of efficiency. The basic question became: how can the government, utilizing efficiency measurement, maximize current available resources to solve the underlying problems that adversely intrude on the ways the government does business?

Through a multiyear study of the City of Lubbock accounts payable, several issues had become apparent. First, working conditions and attitudes needed to improve. Second, the job assignments should be more equitable. It was clear, through analysis and team input from the accounts payable staff, that the major problems related to the management of resources rather than a lack of personnel.

The City of Lubbock is committed to be tough on costs, adopting an approach that says: the solution to any problem must come through efficiency improvements rather than additional personnel. Change is seen as an opportunity to expand creative talents.

Accounts payable staff members proved their willingness to change by rolling up their sleeves to establish order over...