Ballarat City Council’s top tips for saving money on procurement

Over the past decade, Ballarat City Council has delivered significant savings by swapping the manual processing of invoices for credit cards. Stephen Bigarelli, Ballarat City Council’s Accounting Services Manager, explains.

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Previously, the accounts payable staff at Ballarat City Council faced a monthly stack of bills amounting to about 1500 invoices, which cost more to process than their face value. Switching to credit cards has enabled the council to deliver significant savings. Stephen Bigarelli, Ballarat City Council’s Accounting Services Manager, shares his procurement tips.

They’re responsible for the traditional three Rs – roads, rates, rubbish – and a slew of other services expected by residents. And achieving maximum bang for ratepayers’ buck is imperative for local government.

Over the past decade, Ballarat City Council has clocked significant savings, courtesy of a procurement system which has swapped old school purchasing processes for corporate cards. Situated in regional Victoria, Ballarat has an annual budget of $280 million and services a population of 100,000.

Driven by Chief Financial Officer, Glenn Kallio, the Flexi-Purchase initiative has enabled Ballarat City Council to reduce its accounts payable team from four to two due to a dramatic reduction in procurement paperwork.

Streamlining procurement

Wind the clock back 10 years and every item purchased by the council, be it a box of screws or a filter for the municipal swimming pool, generated a lengthy trail of requisition forms, purchase orders, invoices and receipts.

Accounts payable staff faced a monthly stack of some 6000 bills including around 1500 invoices, which cost more to process than their face value, according to Ballarat’s Accounting Services Manager Stephen Bigarelli. Research shows the cost of manually processing an invoice can be upwards of $40.

“The transactions accounted for only three per cent of total purchase value, but they took up half the time of the accounts payable department,” Bigarelli says. “We were spending a lot of time on low-value stuff. We needed a way of making it more efficient and cutting down on the paperwork.”

The solution was to begin issuing commercial credit cards to staff who had ‘delegated authority’ – the right to spend council funds. “The aim was to initially take away those small value, high volume transactions of $10 to $150,” Bigarelli explains. “By putting them through on a card, it pulls them out of your accounts payable area. The person who purchases the item does all the processing work.”

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The Flexi-Purchase initiative was progressively extended to include all staff with delegated authority. Today about 240 of the council’s 700 employees have cards; collectively they charge around $400,000 a month and the authority expects this figure will continue to rise.

The cultural change required in local government is that a purchase card is just another way of paying for the goods, it adds to the current payment methods of cash, cheque and bank transfer.  The purchase card not only provides for cost efficiencies, but also provides the organisation with greater security over payments through the improved reporting mechanisms.

Increased efficiencies

The change in modus operandi has resulted in increased efficiencies in the field, as well as the accounts department, Bigarelli says. Maintenance crews can swing by the local hardware store for that box of screws, rather than having to suspend a task for days while waiting for a purchase order to be processed.

Staff making four and five figure purchases are also encouraged to charge them whenever possible. “Our policy is that if you can use a card, use it,” Bigarelli says.

“If you can get a supplier who will allow you to put a $10,000 or $20,000 transaction on a card, then you do it.”

Checks and balances

Controls have been introduced to ensure the increased autonomy the cards provide to staff is not misused. The purchase card has been introduced with strict policy and guidelines and has been thoroughly worked through with the Council’s audit committee, Council and external auditors.

Staff sign a terms of use agreement upon issue and managers are required to approve transactions at the end of the month. The accounting services department conducts audits when cards are up for renewal, and at random.

It’s a tight policy that has worked well.

“If you abuse the card knowingly, disciplinary measures will result,” Bigarelli says. “But no-one has had their employment terminated to date and we rarely find issues. When we do, it tends to be problems like people coding things wrongly, for example. We trust staff and they’ve repaid that by doing the right thing.”

The council is often contacted by other local governments that are considering implementing similar systems. “We were very much one of the first councils in Australia to do this,” Bigarelli says.

“We’re very proud of what we’ve done and the savings that we’ve been able to make. Like most councils, we operate on a limited budget and there’s constant pressure to keep operations as lean as possible. We’re always looking for ways of improving what we do and overhauling the procurement system has generated real savings.” Buy-in from senior stakeholders and the implementation of rigorous controls make for a smooth transition to a Flexi Purchase-style model, Bigarelli says.

“The bottom line is do it properly and it works and works well.”

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