AP Automation: Measuring ROI and Monitoring for Success
In this multi-part Blog Series, we’ve looked at how companies can identify process pain points, communicate them to executives to secure buy-in, map their P2P processes to eliminate bottlenecks AND kick off a pilot project.
In this multi-part Blog Series, we’ve looked at how companies can identify process pain points, communicate them to executives to secure buy-in, map their P2P processes to eliminate bottlenecks AND kick off a pilot project. In this blog, we’ll look at tips for measuring the results of your AP automation initiative and monitoring processes for ongoing improvement.
“What gets measured gets improved” - Peter Drucker
Your organization has successfully completed a pilot project to identify any missed requirements, unexpected process bottlenecks or other unanticipated issues with your AP automation plan, and created an opportunity to get buy-in from all the stakeholders in the project, from executives to end users.
Sometimes, when firms come this far and finally go live with their project, the assumption is made that the project is complete and once everything is operational, the initiative can be declared a success.
While there’s definitely an opportunity to celebrate a significant milestone, ‘going live’ with AP automation is typically the beginning of a new, longer stage in an organization’s digital transformation journey.
It’s at this critical stage that measuring results and monitoring key performance indicators will allow your firm to validate the success of the project and establish practices to continually measure and monitor results for ongoing improvement.
Meaningful Calculations for AP ROI
Going live with an AP automation project can often mean “making good” on the commitments made up front to secure budgets and buy-in that led to the initiative in the first place. When those results don’t live up to expectations, it’s time to look at initial assumptions and at the end result to identify where the discrepancy came from.
The following is a basic summary of some calculations and metrics to consider over the first year and during the course of the first five years to demonstrated quantifiable results of your AP automation project.Total Cost per invoice:
(Number of AP Clerks * Average Annual Salary) / Number of Annual Invoices (does not account for overhead or other soft costs)Perfect Payment Index Calculation:
% electronic * % paid on-time * % discount achievedFirst Year ROI (%):
Annual Savings / Total Cost of ImplementationPayback period:
Total Cost of Ownership (Annual Subscription* Number of Years + Implementation Cost) / Annual Savings5-Year ROI:
(Annual Savings * 5) / (Total Cost of Ownership + 5 Year Maintenance Costs)
Monitoring KPIs for Ongoing Optimization
While return on investment calculations and unit costs per invoice provide meaningful metrics on the AP automation initiative itself, establishing and monitoring key performance indicators that aligned with the organization’s business goals elevates the role of AP beyond a cost center to a strategic asset.
Often, other business drivers beyond cost savings are key to AP automation initiatives becoming a priority. In our experience at Artsyl, business growth often leads to a need for AP automation - BOTH in the form of companies experience growth and struggling to keep pace from a back office perspective OR from forward-thinking companies seeking to expand operations and looking for potential weak points in their internal processes.
Establishing and monitoring KPIs for accounts payable that focus on things like the ability to monitor and assess cash flow in real time, the ability to monitor and choose to take advantage of early pay discounts and the capacity for an existing AP team to take on added volume, speak to the readiness of accounts payable to support the business and its strategic goals.
Successful completion of an AP Automation project can have a far deeper impact on an organization that lowering invoice processing costs. It can become a springboard for digital transformation within an organization, leading to the digitization and automation of other business processes and an enterprise-wide process revolution.For more information about how to continue your path towards AP automation and process improvement, contact your Artsyl Technologies account executive.