Mergers and Acquisitions
– A/P takes the lead –

With over 27,000 reported mergers in the last 3 years, many Accounts Payable managers have faced the nightmares of merging their function with another organization. For those of you faced with this prospect, we offer the following suggestions to smooth the transition:

Assess your procedures and practices

Before you consolidate, survey your own A/P operation as well as the operations you are merging. Look at your own with the same level of scrutiny as the others. You’ll find that some of your practices should be changed or replaced by those of the acquired organization. Additionally, you may discover functions performed in the acquired operation that you will have to add to your own.

Staff for the transition

During the transition, your resource requirements may expand substantially. You are likely to lose some of the best people from the organization you’re acquiring. A significant number of invoices and expense reports may "come out of the woodwork." Expect a decrease in the quality and timeliness of items getting to accounts payable. As submitters, approvers and procedures change, error rates are likely to increase.

Combine vendors files intelligently

If you simply add the acquired organization’s vendors to your vendor file, you’ll be adding many duplicate vendors and creating potential future problems. Clean up your own vendor file and only add those vendors that are necessary. Typically, only 5 to 20 percent of the vendors in the acquired vendor file need to be added. The rest of the vendors are already in your file, are inactive, may never be used again, or have incomplete addresses.

Retain relevant records and software

Decide whether to convert automated A/P history files and how you’ll retain electronic and manual records. Electronic history is useful for vendor MIS, duplicate checking and 1099 reporting but alternatives to a full conversion may save a lot of time and effort. Whether or not you convert, make sure you’re in compliance with IRS Revenue Procedure 98-25. If you don’t convert, make sure you keep around files and the programs needed to process them. If you do convert, make sure you document the conversion process and retain enough information to be in compliance.

Implement special controls after consolidation

The first 90 days after consolidation are critical. Typically, some things were missed in the pre-consolidation survey. Turnover within and external to A/P will adversely affect quality, timeliness and compliance. Inquiries from vendors and employees will increase.

Have RECAP help

We’ve worked with many accounts payable and purchasing software packages and operations. RECAP’s expertise is acknowledged as the key source on A/P and supplier relations in The Art of M&A Integration – A Guide to Merging Resources, Processes & Responsibilities written by Alexandra Reed Lajoux and published by McGraw-Hill in 1997.

RECAP has checklists and tools for merging. A/P operations. We can clean up and merge your vendor files. Our unique process to convert vendor information requires no conversion software from your IT organization and minimal effort by your staff. RECAP’s VITAL™ service eliminates the need for converting history files but provides the MIS, duplicate checking, and 1099 information you’ll need and helps you meet IRS requirements. For more information about RECAP’s Merger, Acquisition and Consolidation Services, call RECAP at 973-697-6430.

For more information about RECAP or its services,
please send e-mail to info@recapinc.com