This guest blog was contributed by Ken Neal | 12/9/13
The opportunity for companies to transform their accounts payable function into a best-in-class finance operation is greater than ever, given today’s technology and services for streamlining and automating workflows.
According to a recent survey sourced by Canon Business Process Services, today’s best-in-class AP departments can deliver their companies a host of meaningful business benefits, including increased transparency and revenue, reduced costs, strengthened compliance and financial controls. Specific findings include:
- Cost per invoice: Best-in-class AP departments are able to process invoices at a cost of $2.20 per invoice, 88 percent lower than the average AP department does.
- Invoice cycle time: Best-in-class AP departments process an invoice from receipt to ready-to-pay status 4.5 times faster than average AP departments do, resulting in a gain of 10 extra days in the payment window.
- Invoices processed per FTE per month: On average, best-in-class AP departments process 2,000 more invoices per FTE per month than the average AP departments do.
- Invoices processed straight through: In best-in-class AP departments, 44.2 percent of invoices reach ready-to-pay status without human intervention, more than twice that of average AP departments.
- Suppliers converted to e-invoicing: Best-in-class AP departments see 41.8 percent of suppliers submitting e-invoices, nearly three times that of average AP departments.
- Exception rate: Best-in-class AP departments encounter invoices with at least one discrepancy half as often as average AP departments do.
We have found that achieving these types of results is not beyond the reach of any AP department, regardless of the size of the organization.
Canon Business Process Services’ experience providing AP services for many of the world’s leading companies has led us to develop a methodology for companies to implement best-in-class AP operations. As companies consider the operational investment necessary to reap the benefits of a transformed accounts payable function, there are few steps that we recommend they undertake.
Step 1: Centralize the intake process
Invoice receipt at most companies is highly disparate, coming from a variety of sources in a variety of formats. A centralized approach to receiving invoices adds a layer of control that is an important first step on the path to a high-performance AP department. In analyzing survey data, we found that adopting a centralized structure reduces the cost and time taken to process an invoice by 20 percent and 44 percent, respectively. The efficiency with which invoices are processed increases by nearly 50 percent.
Centralizing the intake process requires companies to centralize and scan receipts as well as convert paper or digital invoices into data that is routed to the client’s ERP, AP workflow and content management systems.
Step 2: Workflow automation
Transforming the AP process into a leading-edge function is attainable for organizations of all sizes, due to advancements in workflow automation coupled with data capture, supplier portal and implementation with ERP and content management systems. AP automation consists of three complementary solutions: invoice imaging, data capture and extraction, and invoice automation.
Research indicates that 70 percent of companies already utilize invoice imaging – converting paper documents to digital ones – but data capture and extraction and/or invoice automation must be implemented in order to process the invoice. Data capture and extraction eliminates manual entry by using optical character recognition (OCR) and self-learning algorithms. Invoice automation takes the process even further by routing invoices for approval, matching invoice data, catching discrepancies and routing approved invoices to payment, all without human intervention.
We found a tremendous difference in the level of performance for companies that utilize imaging, capture and AP automation solutions compared to those that do not: a cost per invoice of nearly $5 lower, invoice cycle time that is 3.5 days shorter, and staff that can process 117 percent more invoices.
Step 3: Outsourced or managed services
Lastly, we found that organizations that at least partially outsource the execution of their AP function enjoy numerous benefits: a 25 percent decrease in the cost per invoice, a cycle time that’s 27 percent shorter, twice the number of invoices processed per FTE, and a 32 percent improvement in exception rates.
We believe that by following these steps, organizations can put their AP departments on track toward achieving best-in-class status.
Ken Neal is a certified enterprise content management practitioner (ECMP) and fellow, corporate communications for Canon Business Process Services, an international leader in managed services and technology.