[Editor’s Note: Today’s article is a preview of our upcoming, Ardent Partners’ Accounts Payable Metrics that Matter in 2019 eBook. Be sure to check back next week when we publish the results.]
As modern businesses progress deeper into the digital realm and away from manual, paper-based processes, their automated systems are capturing an increasing amount of potentially valuable information and data. Left to reside untouched in legacy “systems of record” (i.e. back-end ERP and other legacy financial systems), this information offers no real value to the enterprise; however, when analyzed and presented within systems of engagement (i.e. ePayables, P2P solutions, and solutions that support business processes) the data is generally more accessible and usable and can better support decision-making and drive real value.
Despite the broad-based move towards process automation within large and mid-sized enterprises around the globe this past decade, accounts payable is a business function that has lagged behind most others in its adoption of technology. As a result, it is not surprising to find that the average AP department not only lacks automation, but also lacks alignment and engagement with business executives. A centralized AP group that receives a majority of invoices in paper format and processes them in a manual fashion can drive improvements through standardization, but its efficiency potential is capped since it is standardizing a manual process that cannot be fully-scaled. A centralized structure with standardized and automated processes is the foundation upon which the next level of efficiency and visibility within AP can be realized. The good news is that more AP departments and their stakeholders understand this opportunity and are focusing on it.
Why Metrics Matter
In today’s competitive business environment, having access to accurate and real-time metrics can be a game-changer. Establishing and measuring relevant metrics allows an organization to understand its “current state” while laying the groundwork for its desired “future state.” If a group is unclear on where it stands today, it cannot begin to make lasting enhancements that improve tomorrow’s performance. Tracking metrics enables continuous improvement programs to take hold and provides organizations with a better opportunity to set proper goals and objectives and “course correct” when achieving them is in doubt. For most AP groups, the first step to tracking valuable performance metrics is access to quality data, typically delivered via process automation solutions.
Establishing and measuring relevant and actionable metrics is an important part of any business function since it provides the opportunity to set, track, and ultimately achieve goals and objectives while providing the key inputs to drive continuous improvement efforts. With process automation tools in place, an AP department is significantly better able to capture performance metrics than in a manually-driven environment. In Ardent’s upcoming Accounts Payable Metrics that Matter in 2019, we have developed a list of AP department metrics that can be used as a means to establish a performance and business impact baseline and then improve upon them. The list is not intended as an all-inclusive list of metrics, but rather a starting point for organizations who have not yet emphasized capturing and reporting metrics. It can also be used to get insight into how the Best-in-Class AP operation is managed.
Conclusion
As process automation becomes more commonplace in the accounts payable market, what will begin to differentiate one group from another will be its ability to gather, analyze, and leverage its data to enable agility and collaboration and ultimately, support better decision-making. The ability to gain meaningful insight into internal processes and performance, as well as external trading partner relationships provides an AP department and its stakeholders with useful intelligence that can be used to advance and improve. And, as reporting and analytical capabilities mature, this level of visibility and intelligence will increasingly influence organizational decisions and strategies that can impact the top and bottom lines as well as overall competitiveness.
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