Guest Post: The 5 most critical metrics to a successful AP automation proposal

The benefits of accounts payable automation are proven and compelling.

And 59 percent of accounts payable departments cite automation as a top priority for investment, according to the Institute of Finance and Management’s (IOFM) 2017 Future of AP Survey.

But most accounts payable departments still rely on manual and semi-automated processes.  This is especially vexing in departments that have made big investments in state-of-the-art ERP applications like PeopleSoft.

 

Accounts payable departments cite several factors for not automating:

  • Lack of capital budget
  • Lack of department resources
  • Lack of IT resources
  • Technical challenges
  • Supplier resistance

But one of the biggest reasons that many accounts payable departments have not automated is that they don’t know how to develop a business case that will win approval from senior management, both from the business and technical side.

 

The trick is to focus your business case on the metrics that senior executives care about most:

  • Metric #1: Invoices paid-on-time: Only 4 percent of businesses pay all their supplier invoices on time, IOFM reports. Delays in approving invoices cause a backlog of invoices, make it difficult to rectify cash flow, strain supplier relationships, and result in late-payment penalties and missed early payment discounts.  Top performing accounts payable departments pay more than 90 percent of their supplier invoices on-time, IOFM reports.  Automation is a big reason that top performing accounts payable departments enjoy faster cycle times.  Data is captured and validated automatically, without human operator intervention.  Invoices are digitally routed for approval and exceptions handling based on pre-configured rules.  And images and data on approved invoices is seamlessly uploaded to PeopleSoft.
  • Metric #2: Staff productivity: Manually processing invoices is burdensome: mail must be opened, data must be keyed and validated, invoices must be matched to purchase orders and shipping receipts, approvers must be tracked down, invoices must be physically routed to purchasers, and data on approved invoices must be keyed into PeopleSoft. Automation eliminates these manual tasks, enabling staff at highly automated operations to process more than 10 times as many invoices per month compared to operations with little or no automation (22,756 invoices per month versus 1,350 invoices per month), IOFM reports.
  • Metric #3: Cost per invoice: Automation eliminates the costly steps of invoice processing, including: keying and validating invoice data, matching invoices to purchase orders and shipping documents, tracking down purchasers, physically routing invoices for approval, back-and-forth phone calls and e-mails to resolve exceptions, keying data into PeopleSoft, searching for lost or misplaced invoices, filing and retrieving invoices, and gathering data for auditors. That is why highly automated accounts payable departments spend less than one-quarter as much as their peers with little or no automation to process a single invoice ($1.77 versus $8.78 per invoice), per IOFM.  That’s music to a cost-conscious executive’s ears!
  • Metric #4: First-pass match rate: Nearly two-thirds of accounts payable departments must manually handle more than 75 percent of the supplier invoices that they receive, IOFM finds. A low first-pass match rate increases costs, opens the doors to errors, and delays approvals.  Automation increases the first-pass match rate by capturing invoice data, checking for duplicate invoices, validating supplier information, calculating line-item data on invoices, and matching invoices with purchase orders and proof-of-delivery documents.  Increasing the first-pass match rate gets information into your ERP application faster and more accurately.
  • Metric #5: Early payment discounts captured: An eye-popping 80 percent of suppliers are willing to exchange a discount on the invoice-due amount for early payment, IOFM reports. But most accounts payable departments capture less than 21 percent of early payment discounts they are offered.  A big reason for this is that most accounts payable departments cannot approve invoices within the early payment discount window.  Top performing accounts payable departments are using automation to capture more early payment discounts.

And the combined value of an invoice processing solution integrated with PeopleSoft, such as the one from our Partner Canon Information and Imaging Solutions (CIIS), brings even more value to organizations.

Improvements in any of these metrics are compelling to senior executives.  Together, they will make your executives champions of your accounts payable department’s automation efforts.

 

This guest post is brought to you by Graviton’s Partner Canon Information & Imaging Solutions.

Interested in more resources or advice on preparing your business case for AP automation? Download a white paper sponsored by Canon: 6 Most Important Metrics to a Winning Business Case for AP Automation

Graviton Consulting Services, Inc. is a Canon Solutions Partner.  They are a lean and close-knit professional services company, providing PeopleSoft implementation and upgrade services. Focusing on improving the business processes, using the latest enhancements and features, gives our clients the best return on their investment. For more information, please visit us at www.gravitonconsulting.com.

 

About Canon Information and Imaging Solutions, Inc.

Canon Information and Imaging Solutions, Inc. (CIIS), a wholly owned subsidiary of Canon U.S.A., Inc., brings together Canon’s world-class imaging technologies and information management expertise to assist organizations in achieving their digital transformation objectives.  With a focus on innovation, CIIS’s software development and solutions delivery capabilities scale across several practice areas: Business Process Automation – including Procure-to-Pay & Order-to-Cash automation, Document Solutions, Information Management Services with a focus on content capture, management and collaboration, and Security and Infrastructure Management.  With expertise in emerging technologies such as artificial intelligence, machine learning, and big data analytics, CIIS deploys its solutions in partnership with leading technology providers and offers comprehensive consulting and professional services that are trusted by organizations of all sizes. Additional information about the company, its programs and mission can be found at ciis.canon.com.



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