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March 7, 2007
City saved $1 million through vendor discounts for early payment
  
The City saved $1 million thanks to an initiative it launched to obtain discounts offered by vendors to the City for early payment of invoices.

“This milestone demonstrates the ongoing, corporate-wide efforts to ensure the responsible and efficient management of City finances,” said Mayor David Miller. “By increasing financial controls over public funds, the City has realized savings that are being used as part of the City’s operating budget to help pay for services affecting the quality of life of Toronto residents.”

As a result of improvements to the City’s accounting processes, in April 2005 the City officially launched the corporate-wide initiative to maximize the City’s efforts in obtaining early payment discounts offered by vendors. Vendors offer a discount term, typically two per cent to three per cent, on their billing invoice for goods and services if paid within a specified period.

“The City’s administration is now winning awards for its financial management excellence and we continue to implement and monitor additional financial improvement initiatives,” said City Manager Shirley Hoy.

As of September 30, 2006, 90 per cent of all the City’s invoices were paid within the City’s standard payment term of 60 days. In 2006, the City received 82 per cent of the discounts that vendors offered to the City.

“Thanks to the commitment of City staff to using resources wisely, we have seen significant increases year after year in the amount of early payment discounts that the City is receiving, culminating in this $1 million mark,” said Joe Pennachetti, Deputy City Manager and Chief Financial Officer.

The City’s rate for obtaining discounts from vendors increased from 30 per cent in 2004 to 82 per cent in 2006 - a 52 per cent improvement. The City has also realized a dramatic 547 per cent increase in vendor discounts received from 2004 ($96,835) compared to 2006 ($626,296).

As the amount of early payment discounts that the City receives increases, the number of vendors willing to offer the City early payment discounts also increases.

The Chief Financial Officer and Treasurer reports to the General Government Committee on a quarterly basis on the percentage of invoices that are paid according to terms, the number of invoices that have been paid past the term and the penalty cost that is incurred.

Toronto is Canada’s largest city and sixth largest government, and home to a diverse population of more than 2.6 million people. It is the economic engine of Canada and one of the greenest and most creative cities in North America. In the past three years Toronto has won more than 50 awards for quality and innovation in delivering public services. Toronto’s government is dedicated to prosperity, opportunity and liveability for all its residents.

Media contact:
Cindy Bromley, Manager, Finance and Administration Communications, 416-392-4993


 

 

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