Accounting for purchases

Until last summer, Waterbury, Conn., employees expected a one- to two-month wait for anything they ordered. From pencils to computers, every requisition had to run through a gauntlet of red tape before the finance department could issue a purchase order. Once the items were received, another paper chase would ensue. “We were notorious for paying at 90 days because it took so long to get the information back to the finance office,” says Kim Diorio, information technology director.

As of July 1, 2004, however, Waterbury’s procurement system has been operating online, cutting out redundancies that bogged down the purchasing process and automating the city’s workflow. Waterbury replaced its mainframe finance software, in use since 1986, with Web-based software that ties together procurement, accounts payable, accounts receivable and general ledger functions.

The change resulted from a state directive to clean up its finances. Faced with bankruptcy in 2001, the state appointed an oversight committee to help dig the city out of a hole. Part of the problem: the city’s technology was so outdated, it hindered business.

The purchasing process, for example, largely relied on paper forms making their way from one office to the next for approvals. Once requisitions arrived in the finance office, new forms were created to check for available funds. If money was available, the forms would travel to the purchasing department where a purchase order (PO) would be generated and mailed. If money was not available, the finance department would kick back the request. “That was one of our big bottlenecks,” Diorio says. “You could send [the requisition] through thinking you’re going to get your product in a month and then come to find out you were just getting back your original request that says you’re over budget.”

The state issued a $100 million bond to keep the city afloat and earmarked $5 million for a technology upgrade to include the city’s financial systems. In 2002, Waterbury solicited bids for a new system, and a 15-member committee of employees from various departments selected a software suite from St. Paul, Minn.-based Lawson. The city also contracted with New York-based Velocity Technology Solutions in September 2003 to help adapt the software and train employees.

Just in time for departments to sign annual contracts, the online procurement system was working. Now, employees can sign on to the system, enter a requisition and see immediately if funds are available. Once they submit the electronic request, it shows up in the appropriate managers’ online baskets for approval.

If the requisition is unapproved for more than 48 hours, the system sends an e-mail to the manager to remind him or her to review the request. When the purchasing director approves the request, a purchase order can be generated from the information in the electronic requisition, eliminating redundant data entry. “It has definitely streamlined our process,” Diorio says. “The requisition is routed electronically through the system, and the information is turned into a PO if everything is correct and approved.”

The software includes an online receiving function that employees use to report when their products arrive. The invoices are sent to the accounts payable department, and if they match the purchase orders, the department pays them. “It’s a much quicker, timelier process, and our vendors have noticed a tremendous increase in paying on time versus being 60 to 90 days late,” Diorio says. “We have net 30 and net 60 terms with our vendors, and we are typically paying them within their terms.”

Currently, the city is installing a scanning system to add documents or other records to requisition files. For example, to supplement the product description in the requisition form, an employee could scan in a brochure about the product. “Down the road, we can potentially scan invoices or any kind of information we want to keep in the system,” Diorio says.

Waterbury’s $1.8 million financial management system has improved the efficiency of its procurement process, allowing employees to receive products within one to two weeks, and has simplified accounting for all its departments, Diorio says. “I used to spend a significant amount of time trying to figure out where I was with my budget, what had been spent and what I needed for the end of the year so I [could] run my department,” she says. “Now I can just go online, run a report and within a couple of minutes know what my budget [is], what I [have] spent, what I have encumbered and what I have left. All the departments are now getting used to having that information at their fingertips.”