Editor’s Note: Today’s article is a sneak peek into the findings from Ardent Partners’ latest AP research report, “ePayables 2016: Eyes on Prize,” available for download here. Throughout June and July, CPO Rising will feature several articles highlighting key discussion points from the new report.
Intelligence is one of the most powerful attributes of any business function. In fact, intelligence is critical to accounts payable (“AP”) teams in understanding how the executive suite judges its performance and progress. More specifically, AP needs to know how the CFO—who AP often reports into—judges the function’s ultimate success. This knowledge can be vital in changing AP’s strategic position within the enterprise, helping to better align department priorities against greater enterprise performance indicators.
This knowledge can also be valuable in the course of building a business case for AP automation. If AP understands the metrics it is evaluated on, then they can more fully account for the benefits of a technology investment.
Tactical Metrics Dominate the Field
The vast majority of AP departments surveyed in Ardent Partners’ ePayables 2016: Eyes on the Prize(click here to download) research study are evaluated along tactical lines, such as the volume of their activity, (which includes the raw numbers of invoices and payments processed). Sixty-three percent (63%) of AP teams are evaluated using payment metrics that emphasize timeliness, accuracy, and number of duplicate or payment errors. This proves the dominance of tactical evaluation measures and underlines how prevailing the tactical perception of AP actually is.
Room for AP to Grow
Financial metrics, such as rebates earned, early payment discounts taken, etc., are only used to judge 36% of AP teams. And, only 31% of AP teams are judged based on compliance-related metrics, which includes financial as well as regulatory compliance. This is unfortunate, as the data that AP collects can be very valuable in both areas. Procurement’s contract compliance activities can benefit from visibility into AP’s operational data, while treasury could leverage AP’s data regarding upcoming supplier payments to craft richer forecasts and inform a more nuanced cash management strategy.
That so few AP teams are evaluated using these more strategic metrics shows that there is significant room for the function to grow in prominence. The AP team is well-positioned to become a “hub” of financial and operational intelligence, but only if it can successfully change the prevailing perception that it holds only tactical value. Enterprises that begin to evaluate AP along these more strategic avenues may be pleasantly surprised at the insight and impact AP can provide.
Final Thoughts
In 2016, most AP teams are still evaluated along tactical, rather than strategic, lines. This presents both a problem and an opportunity. Many executives, especially the CFO, still view AP as a driver of mostly tactical value, instead of as a “hub” of financial and operational intelligence. This creates an opportunity for AP to grow and convince executives that it can offer more than cost savings and increased process efficiency. Persuading the CFO of AP’s value beyond the tactical arena will not be easy, but the AP teams that achieve this goal will—without a doubt—find the function lifted to new echelons of importance within the enterprise.
Download the ePayables 2016: Eyes on the Prize report today (click here) for more about the state of the AP marketplace and how the function can improve in the years to come.
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