How to know if your Accounts Payable Strategy is Working?

How to know if your Accounts Payable Strategy is Working?

How to know if your Accounts Payable Strategy is Working?

Often, employees are asked to set up a few performance metrics or KPIs in relation to their job. They need to report these metrics at their monthly meetings as a way for the management to gauge their progress. Sounds simple enough? Not! If measuring KPIs is one thing, identifying suitable metrics is a whole different ball-game.




“...tangible outcomes are easy to measure…”

The measure of success in traditional core engineering jobs attached to the three branches — civil, mechanical, and electrical was usually determined by the number of orders that came in, the revenues as a result, and acquisitions, if any. So, jobs in the earth-moving machinery or heavy engineering divisions always showed tangible outcomes like the number of earth movers sold or the number of critical piping projects implemented for process industries, respectively. Tangible outcomes are easy to measure.

Today, technology has changed the way organizations view and measure performance. A good example to illustrate this would be the marketing department in most data-centric, process driven organizations.

Typically, marketing people in the earlier days were given pay for performance remuneration, which could either mean that they brought in new accounts or enhanced existing client relationships. Think about the average marketer’s responsibilities in today’s technology enabled enterprise — from monitoring the number of click-throughs, page-views, backlinks, to worrying about leads and conversions, the performance graph is increasingly detailed and complex. This is a good thing. A marketing professional will change the way he/she models landing pages, after realizing there have been no substantial conversions. This is the definition of a goal-oriented task.

“Know Where You are Going before You Get Going”

Intelligent automation has enabled organizations to model their projects in a way that they accomplish goal-oriented tasks. So, one of the essential metrics in manufacturing that has come about as a result of software is production downtime — measuring and finding ways to reduce production downtime helps businesses prevent processes from stalling and consequently, from losing out on profits. Another advantage of technology enabled processes is that you could force or plan for a downtime in order to facilitate maintenance checks during off-peak hours, so that you stay on course to achieving your production goals.

How to find the right metrics for Accounts Payable?

How to find the right metrics for Accounts Payable?

However, identifying the right metrics for your organization is critical to achieving business goals. You cannot possibly care that your manufacturing unit produces 1000 labels per day when you know that your company revenues are determined by the number of products it has sold, not the labelled packages that your products are wrapped in!

That is why it is important to note what metrics the software you are planning to buy provides. That way, you can decide if it is the right one for your existing work processes. For mission critical processes such as invoice management, you need to figure out what performance measures, when manipulated or tweaked, will get you those quarterly or yearly revenues. Say, your accounting department deploys an invoice processing software to measure the rate at which bills are being reconciled. A dashboard with the number of invoices being processed each day along with details of vendor payments should give you a glimpse into the current state of your accounts payable, and tell you what needs to be changed to hasten invoice processing.

Choose Metrics that will Help Solve for Inefficiencies

Invoice processing software not only streamlines your organization’s purchase to pay but delivers a lot of valuable metrics that you can monitor to improve payables management and plan for profits. Some of these are:

  • Invoice processing cost: this metric will answer the question ‘how much does it cost to process an invoice’, giving you ample leverage to plan your budget
  • Frequency of invoice exceptions: this metric will help you plan for risk — for example, processing could be delayed due to invoice-purchase order mismatch
  • Days Payable Outstanding: this metric will help you manage your resources properly — the longer it takes you to pay your bills, the more costs you incur; creditors usually like to give only 30 days of credit, meaning, beyond the due date, you will be paying off your dues with interest

A good invoice processing software with powerful data capture capabilities will ensure that invoices are automatically scanned and processed in bulk, thereby, saving you on processing times, valuable man-hours, and consequently, on invoice processing costs. In fact, these are the popular factors or metrics that organizations are looking for when selecting a suitable intelligent process automation platform. Figure out the inefficiencies in your current processes, decide on an IPA tool accordingly, and then start identifying piecemeal events along the process chain that, when manipulated, will help resolve those pain points. These are your metrics that need to be monitored regularly for optimal performance.

Taking the best course of action requires preparation — you have process automation at your disposal to help you with that.

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