Construction firm zaps bills with zero invoicing

May 12, 2008 (Computerworld) This story is one in a series showcasing the best projects of this year's Premier 100 IT Leaders.

When an IT professional hits a home run, sometimes it's the magic of technology that's behind it. But sometimes it's the sheer brilliance of an idea. Tridel Corp.'s Zero Invoice project is an example of the latter.

The concept was simple enough: Rather than process and pay invoices as they come in, just pay suppliers what records show is owed to them at the end of the month. In a major test of the system, Tridel reduced the monthly volume of invoices from 2,400 to just 17 -- saving $21,000 in processing costs -- and sharply cut the number of disputes and overpayments. CIO Ted Maulucci calls the results "pretty dramatic."

When Tridel sells a condominium, the buyer often selects upgrades, such as better appliances or an optional hardwood floor. Some of these items have standard prices, and some are custom-priced at the time of sale, which can occur as much as three years before the buyer moves in. Meanwhile, Maulucci says, the suppliers that will ultimately bill Tridel for the upgrades, and whose own systems tend to be rudimentary, can lose track of what they agreed to bill.

Before Zero Invoice, suppliers would send bills to Tridel every day -- some 65,000 annually -- as soon as a piece of work was completed. Then a Tridel project manager would have to match the invoice with his own records of what charges had been agreed to months earlier. Discrepancies occurred often and were very labor-intensive to resolve. "And when an invoice comes in at the wrong amount, you don't always win," Maulucci says.

Now, Tridel aggregates each supplier's charges, based on its record of what was done during the month, and issues a single pro forma invoice for the supplier to sign off on at the end of the month.

"When I tell people about Zero Invoice, they say, 'Don't your [suppliers] hate that?' But it was the complete opposite," Maulucci says. "The [suppliers] don't have the systems we do. They say, 'I like it. It's easy for me.' There's a trust level. They are getting paid faster, and it's easier for them to administer."

Line managers at Tridel like it too. Kevin McKeown, a construction project manager, says Zero Invoice has reduced the time he spends matching invoices with purchase agreements and verifying prices, from one to two hours per day during the last two weeks of the month to just one to two hours per month.