Ardent Partners recently published our annual ePayables report, “ePayables 2014: The Quest,” and, like all of our payables reports this year, the research is geared toward AP leaders, financial managers, executives, and those who aspire to these roles. The report presents a comprehensive overview of the state of accounts payable, as well as focusing on ePayables technology and systems in addition to providing a way for accounts payable teams to benchmark themselves against the Best-in-Class and improve their overall performance.
We spoke with over 190 accounts payable, finance, and other professionals across 25 different industries to give our readers a complete picture of the state of the market. The report is available for free (registration required) at four report sponsor sites: Basware, Ariba, Taulia, and Tradeshift.
The Five Drivers of Top AP Performance
It’s easy to start off trying to do too much when leading an accounts payable transformation. Take heart though, because driving top performance doesn’t have to be an onerous process fraught with wailing and gnashing of teeth. Focus on these five drivers that make Best-in-Class teams run efficiently, and you too could have a top AP team on your hands.
Driver 1: Find the Right Metrics
There are a lot of accounts payable metrics you could measure: DPO, invoice processing time, cost per invoice, etc. The challenge isn’t finding metrics to measure, but rather aligning those metrics to your company’s overall business goals. Just because you can measure something, in other words, doesn’t necessarily mean that you should.
Driver 2: Include AP Automation Where Possible
The Best-in-Class in our ePayables study make extensive use of AP automation tools, such as eInvoicing, document imaging and workflows, and business networks. This use of technology is what makes it possible for an AP staffer at a Best-in-Class company to process nearly 3-times as many invoices as a staffer at any other company.
The Best-in-Class also have straight-through—or touchless—processing on 50.3% of all their invoices; this is 3-times higher than everyone else. The reason for this? Effective use of AP automation toolkits, which also allows Best-in-Class teams to shrink their invoice processing time to a third of the average.
Driver 3: Linkage Throughout the P2P Process
Best-in-Class teams are twice as likely to have a linkage through the entire procure-to-pay (P2P) workflow. This provides a holistic view throughout the entire procedure, and allows for AP teams to track their own performance in relation to the rest of the process. Such a holistic viewpoint also allows for finding and fixing inefficiencies much more quickly than just seeing one little piece.
Driver 4: Transparent Supplier Communication
Communication is critical to overall business success. In the case of buyer-supplier interaction, transparent and effective supplier communication is a key differentiator between a successful program and one that’s struggling to keep its head above the paper invoice flood.
More than 40% of the suppliers for Best-in-Class enterprises participate in an eInvoicing program. When combined with the more than 50% of Best-in-Class AP teams who provide an online supplier portal to track invoice workflow, you can be sure that communication is key to overall business success.
Driver 5: Employ Working Capital Optimization Tools
Working capital allows an enterprise to expand; it also allows suppliers to expand and buy the things that they need to support their business. Having the tools in place to optimize working capital via the invoice payment process can make a difference in an enterprise’s overall cost of capital. And, while infrequent, payment timing can make the difference between solvency and insolvency for your suppliers.
Best-in-Class accounts payable teams use working capital optimization tools at a 53% higher rate than all other companies in Ardent’s recent ePayables study. Best-in-Class companies are also 4-times more likely to use a dynamic discounting solution in order to more fully capture early payment discounts, which is yet another way to optimize working capital overall.
In Other Words
The speed of business is only increasing. Because of this, AP/finance teams can ill afford to be seen as cost centers within the business. These five drivers of top performance, while not the only ways AP teams can improve their operations, if implemented properly can help move the flagging AP team into a position of becoming an integral part of the cost-savings strategy that is only more and more critical as the years pass.
Interested in more detail about the state of ePayables? Check out the Ardent Partners report “ePayables 2014: The Quest,” available free with registration from Ariba, Taulia, Basware, and Tradeshift.
