Thursday 28th March 2024,
Payables Place

The AP Metrics that Matter in 2019: Contested Payments

The AP Metrics that Matter in 2019: Contested Payments

Where does the procure-to-pay (“P2P”) process begin? The answer probably depends on who you ask. Some will say sourcing is the starting point, others will say procurement, and still others might have another answer. However, where the P2P process ends is pretty straightforward, right? It is over once an invoice has been paid, right? Put it in the books, forget about it, and move on to the next outstanding invoice that needs payment, right? All the work required for that invoice has occurred and now all that remains is possibly some spend analysis after the fact, right?

In Ardent Partners’ AP Metrics that Matter in 2019” (click to download) we explored if payment really was the end of the line for invoices from an Accounts Payable (“AP”) department perspective. We asked AP departments what percentage of payments to providers were contested. One would reasonably expect this number to be extremely low as an invoice has already been vetted through the approval process prior to a payment being executed. But what we learned depicted a whole different story. More than 1 in 10 payments (12% to be exact) made to suppliers are contested. This means that a great deal of time and effort still needs to be spent correcting problems you wouldn’t necessarily expect to exist.

Similar to straight-though processing with invoices, one measurement of payment processing should also be the number of exceptions or inquiries AP receives from suppliers after payment is made. This is a critical statistic in terms of the overall productivity and operational effectiveness of the AP department. Spending time handling inquiries about invoices that have already been paid is counter-productive and suboptimal from an overall efficiency perspective. As with invoice exceptions, it behooves organizations to monitor payment exceptions, uncover their root-cause, and work to minimize their occurrence over time.

The modern AP function sits at a crossroads of its overall evolution: enhance just enough to survive in the years ahead, or, revolutionize its development to truly thrive in the face of the digital enterprise. Following the lead of Best-in-Class AP departments, AP professionals (and their leaders) must turn to a wider range of strategies, solutions, and innovations from which to reimagine their programs and attempt to align core processes with the long-term, digital roadmap of the next-generation enterprise. The B2B payment process is a more recent addition to the scope of AP transformation and digitization, and as such, is an area where many enterprises are just beginning to focus their attention. As they do, monitoring the number of contested payments is a key metric that will warrant their consideration.

Download the AP Metrics that Matter in 2019 eBook today!

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