Implementing ERP-to-ACH Payments

When processing ACH payments manually becomes cumbersome for AP, it may be time to consider setting up the ERP system to process ACH payments automatically. That solution helped the AP department at Monster Inc. (Brisbane, CA), which has eight locations, 350 employees, and a six-person AP team in their U.S. office.

“Previously, AP processed ACH payments weekly using a paper-based process," says Michael Pasquinelli, Senior Accounting/Finance Business Analyst. "AP entered all the invoices into Monster’s ERP system in order to produce vouchers. Vouchers were selected for payment by running a report to show all invoices/vouchers due.”

Pasquinelli explains that AP logged into the bank website and created ACH payments for each vendor after obtaining approvals from the appropriate management levels. “Following payment creation, the supporting invoices were provided to the corporate controller and VP of Finance. Since the ACH payment process requires dual approval, both individuals had to log into the bank and approve the payments while reviewing the supporting information for each vendor,” he says.

“Lastly, the supporting documents were returned to AP in order to record payment within our ERP system. “This was an extremely manual process, requiring the AP Specialist to record payment for each vendor. All these manual processes cost the AP department approximately eight to ten hours of work per week,” says Pasquinelli.

Mandate to Reduce Costs Promotes Change

When leadership at Monster Inc. announced a drive to save labor hours and cut costs by improving efficiency throughout the company, Pasquinelli took the following steps:

Set up a project team. The team members included Pasquinelli, the AP manager, AP specialists, an in-house ERP Developer, the corporate controller, the VP of Finance, and the CIO.

Review the current ACH payment process. The AP Manager, AP staff, and Pasquinelli met to review the current ACH process and develop a proposed solution. “We documented the current business process and identified the gaps in the process along with our payback calculations,” he says.

Benchmark what other AP operations are doing. Pasquinelli spoke with other companies to benchmark the proposed solution against their processes in order to help gauge how well the solution would work in Monster’s AP department.

Create a business requirements document that includes payback goals for an ERP-to-ACH implementation. “In the business requirements document, we estimated the payback to cover the cost of development within three months from implementation,” says Pasquinelli. “I was able to justify saving the AP specialist five hours per week and senior management one hour.”

Present proposal to management. “After gathering all the information, receiving buy-in from the users in AP, and writing the business requirements document, we presented the findings to management,” he says.

How the New Process Works

Pasquinelli explains that the new process works as follows:

1. AP defines all the vendors in the ERP system that receive their payments via ACH.
2. The invoices are entered into the system as vouchers.
3. AP runs a pay cycle that selects all invoices/vouchers due, based on a pay-through date and payment method equal to “ACH.”
4. A trial register is printed containing the payment details and payment amounts sorted by vendor and submitted to an internal auditor for review.
5. Once the payment details are approved by the auditor, the package is returned to AP, where the manager approves the pay cycle in the ERP system.
6. An electronic file in NACHA format is produced and saved to the server.
7. AP logs into the bank’s website and loads the NACHA file, which automatically produces all the ACH payments by vendor.
8. Finally, the trial register with supporting documentation is provided to the corporate controller and the VP of Finance for approval through the bank’s website.

Faster, More Secure Processes

“All the hard work paid off,” reports Pasquinelli. “By implementing this project, we were able to speed up the processing time and accurately record payments via ACH,” he says. “Payments are now reconciled to the bank statement on a daily basis. Internal controls have improved as well. The ERP system currently generates and records payments automatically through a pay cycle, reducing the chance of fraud.”