A handy checklist to benchmark the health & performance of your AP processes

A handy checklist to benchmark
the health & performance of your AP processes

Automating accounts payable processes isn’t brain surgery; these days the technologies, systems and practices available are easier to implement and more flexible than ever before. For companies that may be late to the automation game, the good news is that risks are low and rewards can be achieved relatively quickly.

Sometimes all that’s required is a quick check-up to review and assess your existing process to identify unnecessary complexities and potential sources of error that can be addressed by automation.

The biggest question that companies often have is where to start, and how to set expectations for performance improvements. Based on the experiences and insights of our customers and partners at Artsyl, we’ve come up with a handy four-point checklist that can help your department to quickly assess existing processes and benchmark for success.

1. Are Your Operations Centralized or Distributed?

By now, the majority of organizations have consolidated their AP organization and have centralized operations. Industry research confirms that 90 percent of businesses today already maintain a centralized AP department. Of that 90%, one third are organized within a shared-services environment.

The economies of scale derived from a centralized AP department are clear: there is no need to duplicate the same function at different locations or invest in redundant equipment.

According The Accounts Payable Network, the single most important practice that should be implemented into a centralized AP department is the centralization of invoice receipt. By directing suppliers to send their invoices directly to AP, the delays inherent to manual handling are eliminated and the foundation is set for the standardization of processes.

Companies that choose to maintain distributed accounts payable operations for any number of reasons should consider ways to standardize systems, practices and policies to ensure visibility across the organization.

2. How long does it take to process an invoice?

The question of how long it takes to process an invoice should be followed by “How long do you think it SHOULD take?”

Industry studies have shown that process and technology laggards generally require 14-24 days or more to process an invoice. The average is 8 to 13 days. Best in class companies are able to reduce that time down to 1-7 days.

According to the Aberdeen Group, AP automation can reduce invoice processing time from 20 days to 3, empowering the AP “laggards” to jump to the head of the class. Manual invoicing often requires at least 15 steps before posting is complete. A thorough process review can often result in steps that can be eliminated or automated.

3. How Many Invoices Are Processed Per Full Time Employee (FTE)?

This assessment provides valuable insight into overall productivity of accounts payable and defines a company’s ability to scale its operations as the business grows. Employee productivity can vary by size and industry, but on average for a manual AP organization, 50 invoices per day per employee–or a little over 1,000 per month—is common.

According to the Aberdeen Group, organizations with AP automation can process over 4 times as many invoices as those without automation.

Often, the growth or merger of a company that has outgrown its current AP staff becomes the decision point for AP automation. Companies that have gained these levels of efficiency through automation either empower their current staff to handle the increased velocity, or they are able to assign staff members to other areas of the business, dedicating their time to more value-added tasks.

4. What percentage of invoices are paper? What other channels do you rely on for invoice Receipt?

Paper is surprisingly prevalent for many firms—particularly when it comes to invoice receipt. According to the Institute of Financial Operations, nearly 80 percent of companies said that at least half of the invoices they receive are on paper.

Thanks to intelligent capture solutions that can extract transaction information from paper invoices, along with digital files, companies can achieve high levels of efficiency, reliability and predictability, regardless of the media or channel by which they receive invoices—so long as they have a well-designed, automated process supported by the right technology.

5. How Many Invoices are PO-based?

According to the Institute of Financial Operations, most organizations report that half to three-quarters of their invoicing is PO-based, though this number varies by industry.

Due to the lack of visibility and spend control associated with non-PO invoices, many companies are finding ways to increase their percentage of PO invoices. PO-based invoices allow for faster processing and greater accuracy because the approvals occur at the front end and matches can be made between the invoice and the PO and the goods receipt.

Smart process platforms can automate the matching process for PO-based invoices, directing them to payment–or, following business rules to route and manage exceptions.

For companies where the majority of invoices are non-PO-based, including service-based businesses (where 90% of invoices are non-PO), automated, rules-driven approval processes can deliver visibility and spend control.

In either case, defining processes for approval, validation and reporting that reflect the company’s practices is key.

For more information about re-defining processes and defining opportunities for greater and efficiency and control through process automation, contact your Artsyl representative.


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