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: Taulia, Ariba, Basware, and Tradeshift.
What Makes an AP Department Best-in-Class?
Every AP department wants to perform better. “Better,” however, can be a moving target in our global business world. For some teams, it’s doing better at managing exceptions. For others, it may be cost-savings. In Ardent’s recent “ePayables 2014: The Quest,” report, there were a few key areas that made the best AP teams stand out from everyone else: technology adoption, improved processing capabilities, and better supplier communication and engagement.
Technology Adoption
Ardent defines the Best-in-Class in this research effort as the top 20% of AP departments as determined by their cost to process an invoice. Best-in-Class AP teams are keen users of technology. The vast majority of the Best-in-Class AP organizations we surveyed declared that they used some type of document imaging and scanning software, for example, while a majority also made use of automated routing and approval workflow tools. These systems simplify the invoicing process significantly—document imaging by allowing paper invoices to enter the system, and automated routing to make approvals run much smoother than having to hunt down the right person or persons every time.
Nearly half of the Best-in-Class teams also make use of an eInvoicing solution, which is a key differentiator when it comes to simplifying approval workflows and cutting down on the per-invoice cost of processing. This use of technology allows top AP teams to provide up-to-date invoice and payment data, which makes it easy for internal and external stakeholders to improve their own performance and results in a cost-per-invoice that is 86% less than what all other companies face.
Improved Processing Capabilities
You can have all the technology in the world, but if it’s not implemented correctly then you’re not fully enjoying the efficiency gains. Best-in-Class AP teams by and large have significant processing capabilities that allow them to make full use of the technologies they’ve adopted.
These capabilities include two- or three-way matching, which nearly 90% of the Best-in-Class currently enjoy; more than 80% have standardized processes, which result in smoother invoice processing because they’re not re-writing the rules every time. Measurement figured prominently among the top performers in Ardent’s recent ePayables survey—76% of top companies measure key AP metrics. Lastly, but certainly not least, is the 73% of the Best-in-Class who automatically route invoices for approval.
These and other invoice processing capabilities all add up to more than 50% of all Best-in-Class invoices getting processed in a touchless, or straight-through, fashion and an exception rate of only 8% overall—fully half the rate of all other companies. This is a clear win, as fewer exceptions translates directly to fewer manual touches, which is a good thing.
Better Supplier Communication and Engagement
A bad relationship with your suppliers may result in an inefficient AP process. Conversely, a good relationship with your suppliers can lead to a much-improved AP process. In this way, suppliers are an integral part of how well your accounts payable process runs. Refuse to engage suppliers—or do it poorly—and your eInvoicing toolkit is practically worthless.
Agile and progressive businesses interact and collaborate with suppliers at a much higher level than other companies. More than half of the Best-in-Class companies in our ePayables study provide access to a web-based supplier portal; fully 49% have a process in place to capture early payment discounts. Tie this to the nearly one-third of top AP teams who allow suppliers to update all their information online, and it’s clear to see that Best-in-Class AP departments recognize the importance of their suppliers.
The Quick Take
Creating a Best-in-Class accounts payable team is not an overnight process. It takes hard work, and you may experience pushback from some legacy operations personnel against something new and different. It takes more than the tips we provided here, but these are a good start. And it’s worthwhile to remember that, at the end of the day, moving into a higher performance tier can be done—and you’ll end up saving the company money in the process. That’s a win-win for everyone.
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