How Atul Automated Accounts Payable Process with Zero Capital19th Apr 2012
Manual processes created lags in Atul’s accounts payable process, resulting in the loss of Rs 3 crore of Cenvat claims a year. That wouldn’t do.
The Organization: There’s one distinction that Atul Limited, part of the Rs 20 billion Lalbhai Group, has that no other company in India can have—ever. Atul, which produces agrochemicals, pharmaceuticals, aromatics, polymers, etcetera, is India’s first private-sector enterprise to be inaugurated by the country’s first prime minister.
The Business Case: Like most organizations, Atul’s accounts payable (AP) process was built on manual processes. The process kicked off when a shipment of goods—like raw material, for instance—arrived at Atul’s factories and was received by a store clerk who checked it for quality and quantity. The clerk then inputted its details into Atul’s ERP system, and churned out a goods receipt note (GRN).
Every so often—but not often enough—the invoices for the material accompanied by their GRNs were hand delivered to the accounts payable desk, whose staff then inputted details into its system and created an accounts payable invoice. This new invoice was then sent to the company’s Cenvat (Central Value Added Tax) reversal cell, whose job was to reclaim Cenvat.
But many manual processes created a delay of up to 15 days between the time a store clerk received goods and the Cenvat team could reclaim Cenvat. It also held up vendor payments. “There was a delay in payment of 500 vendor invoices per month (out of a total of 15,000) due to the physical movement of invoices from the stores desk to the accounts desk,” says Rajat Sharma, president-IT, Atul.
Because Atul couldn’t book reclaims faster, it was losing Cenvat claims worth Rs 3 crore a year from its books.
The Project: To get around the challenge, Sharma and his team integrated the accounts payable module of Atul’s ERP with an automated invoice scanning system. The solution cleansed the accounts payable process of manual delays and mistakes in entry—ensuring that invoices are sent to the accounts payable team instantly, and that AP invoices are sent to the cenvat team swiftly.
“Our IT team got in touch with Canon’s support and programmed the plug-ins and interfaces of a Canon multi-function device to automate the scanning, conversion and storage of the invoice,” says Sharma. “This entire initiative was achieved with zero capital investment and was live within 48 days.”
Sharma also put in place a governance framework which ensured that delays within the accounts or cenvat teams—potentially affecting Atul’s ability to claim cenvat—were escalated.
The Benefits: The solution added Rs 3 crore worth of Cenvat credits in Atul’s books. Although this was a one-time addition, the process also introduced long-term benefits. The visibility of invoices at the accounts payable desk increased incredibly resulting in multiple benefits. First, the number of misplaced invoices or related documents shrunk to zero from about 50 a month. The increased visibility ensures that payments to suppliers are made faster, shrinking late payment charges and increasing early payment bonuses. And it also allowed for the faster identification of payable liabilities.
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