If you read my previous blog post titled AP Change Makers – Who are they and what do they eat for breakfast?, you will be familiar with the concept of ‘AP Change Makers’. For those who haven’t, I’ll explain. AP Change Makers are neither a rare breed of animal, nor are they supermen or superwomen. They are normal people with a special skill: the ability to understand the opportunities that technology and best practices make available to Accounts Payable departments. Most importantly, they work to understand the investment required, and the value of the return.
In this blog post, I won’t rehash what I think AP Change Makers ‘eat for breakfast’ – I will, however, take the opportunity to walk you through an infographic that nicely summarizes some recent research by Ardent Partners. The infographic gives you all kinds of facts and figures that will make you feel bad if you are a ‘laggard’ and good if you find that your company could be considered ‘best-in-class’. It may even help you realize that through some effort of your own, You are a change maker too.
Did you know that Best-in-class (BiC) Accounts Payable departments save $17 for every invoice they process - as compared to laggards? Now, I was never great at math, but if you have 100,000 invoices a year (or a million) doesn’t that work out to A LOT of savings?
This same research (AP New Dawn, 2013 by Ardent Partners) found all kinds of disparities between well run AP departments and less mature ones. According to the research, average AP departments process a bit more than 25,000 invoices/year/FTE – at a cost of approximately $19 each. Average performers are able to process about 25% of their invoices automatically, with about 26% arriving electronically (receiving e-invoices goes a long way to improving the invoice handling process overall and dramatically reduces associated costs/transaction).
The infographic goes on to show us a snapshot of where the laggards are today. 16% of invoices are deemed ‘exceptions’ which is code for ‘difficult to resolve and pay’. On average, laggards are able to process an invoice in 13.5 days– hopefully you don’t look at that and wish you were that fast. 13 days puts you out of the running for most early payment discounts. That might well be the average invoice cycle time, but the final result is that a staggering 29.2% of invoices are paid late.
If you’re a cup half-empty kind of person, you may well be mentally associating yourself with the laggards at this point and wishing you didn’t have to. Alternatively, you are a cup half-full person and are excited by the opportunity that a poorly managed process can provide someone with your vision and determination. Let’s help you build up your business case a little. With that in mind, let’s see how the top 20% perform. BiC organizations spend just $2.20/invoice and are able to process close to 43,000 invoices/year/FTE.
Top performers have more than 3 times more suppliers sending them invoices electronically. Based on that alone, it should not surprise you that top performers achieve more than twice the straight-through-processing rates as laggards (44% vs. 18%). This all allows top performers to process the average invoice in just 3.3 days vs. 13.5 days (10 days less/invoice).
So, how do they do it? Well, they have a slow, manual, paper-based process…. No, not those guys, the top performers. (Ah, the freedom of writing blogs – you can talk to yourself and it’s okay). Top performers leverage a mix of best practices and technology enablers that produce significant value drivers which drive up efficiencies and reduce costs. For example, they might use Scan & Capture + e-invoicing on the front-end, automated invoice handling in the middle, and engagement with their supplier-base via open cloud-based B2B ecosystems such as the Basware Network.
The latest research suggests that the next wave of change makers is looking hard at e-invoicing (29%), supplier self-service via a portal (19%), and automated invoice routing and approval workflows (37%). From speaking to these change makers personally, I can tell you that these guys and girls are looking to impact KPIs such as invoices/FTE, invoice cycle times, 1st time match rates, cost per invoice, discounts captured, and DPO. If these are your KPIs too, then you should definitely consider your opportunity, your next steps, and the possibility that you too could be an AP Change Maker in the near future.
As always, if you made it this far and have any questions, shoot me an email.