Accounts Payable Optimization

Issue

A high-level assessment at a South American gold mine revealed a traditional mining culture focused on throughput—no working capital reports, targets, goals or key performance indicators (KPIs). Furthermore, the Purchase to Pay process was fragmented, giving poor visibility of cash requirements/forecasting and leading to poor cash management and supplier and government fines resulting from late payments. Accounts Payable (AP) activities were decentralized, with each mine having its own AP Department and following non-standardized procedures. Goods and materials were received at the mines without purchase orders, invoices, or contracts—no effective three-way match was in place.

Highland Approach

Detailed analysis produced a targeted action plan for cross-functional working teams. This personnel-engaging approach helped to change what had once been a “silo” culture into a collaborative one. Measurable financial results were obtained through the implementation of several initiatives, including reengineering several processes around the purchase order and payables functions, staff training and rationalization, and the development of a management dashboard with twelve key performance indicators—including previously non-existent working capital metrics—to ensure the sustainability of project results.

Actions Taken

• Established “fiscal posts” at mine entrances.
• Centralized invoices in fiscal area at mine sites.
• Established electronic PO approval.
• Consolidated Accounts Payable.
• Implemented continuous flow.
• Created electronic receipt of invoices.
• Formalized P-Card processes.
• Reduced government taxes and fines.
• Renegotiated payment frequency.
• Created a working capital KPI dashboard.
• Modified floor area layout.
• Standardized Accounts Payable policies and procedures.