Situation: A state finance department initiated a new accounting, management, and human resources system designed to achieve timely accountability to the public, compliance with laws related to fiscal matters, minimization of duplicate effort, and improved relations with vendors supplying the state with goods and services. The new system was operational for a period of time, but vendors indicated that they were not being paid in a timely manner. The state finance department defined the source of the problem to be a disparity in payment approval processes among the various state agencies and determined that a business process reengineering effort was needed.

The state finance department contracted with POD, Inc. (POD), who, in concert with DrakerCody, Inc., undertook a business process reengineering project to accomplish several things:

  • document the current processes used by agencies who were paying vendors in a timely fashion and those agencies who were not paying in a timely manner
  • to conduct a gap analysis between the payment processes employed of the timely and the untimely agencies
  • to determine causes for payment delays
  • to recommend a standardized payment process to be followed by all state entities
  • to pilot this process
  • to assess the results of the pilot program, to improve the standardized process based on the pilot’s results, and to create a plan for rolling out the new, standardized process to all state agencies.


Approach: Two agencies that were successfully paying vendors on time, and three agencies that frequently failed to pay vendors on time were identified. The business process reengineering program followed included a “discovery” phase, a “To Be” phase and an implementation phase which involved a pilot project.risk

For the discovery process (documenting the current payment processes) the five agencies identified were interviewed and their vendor payment processes documented in detail-text, examination of internal payment documents and time frames, and flow charts. This process identified varying processes and problems among the agencies, as well as specific issues with parts of the new accounting system. The combination of these varying processes, problems, and accounting system issues directly caused the late payments to vendors.

The most significant issue with the vendor payment process was that there were no metrics maintained by any state department to document or track any payment problem, or even to help determine if there was a vendor payment problem. Accountability, change management issues, and problems with parts of the new accounting systems were also significant issues.

The “To Be” report analyzed data collected in the discovery process phase and documented common payment processes among the departments as well as variations from the common practices. Fifteen most common errors in the payment process were identified. Gaps between practices that worked and those that did not work were identified. Best practices by the state as well as industry standards were looked at. Analyses of late payments by “cause” from one year to the next were undertaken. Analyses of duration of late payments using a composite of factors (causes) were undertaken.

Specific corrective measures were recommended for all issues, problems, and gaps identified.  A pilot program to implement the corrective measures process was developed with a plan for next steps to be taken as a result of the pilot program.


Results: POD, Inc. and DrakerCody, Inc. produced a reengineered process for the state vendor payment process. We took an accurate, detailed look at the existing vendor payment process and identified gaps, problems, and causes of delays in payment to vendors. A revamped payment process was put forward to be implemented through a specific pilot program.  A process to be followed based upon the outcomes of the pilot program was developed and recommended as part of this business process reengineering project.