For over a decade, Ardent Partners has conducted an in-depth market research study of the accounts payable (“AP”) market that leverages a unique framework to highlight the performance of top-tier organizations (which Ardent refers to as the “Best-in-Class”) by analyzing a specific set of benchmark criteria. In each of those years, Ardent Partners defined Best-in-Class performance as the 20% of enterprises with the lowest average invoice processing costs and shortest average invoice process cycle times. These top-performing enterprises have taken their AP operations to the next level by leveraging technology to streamline the AP process, make it more efficient, and enable more strategic initiatives to be performed. Best-in-Class enterprises have demonstrated their ability to drive superior performance across both traditional and contemporary AP metrics.
Simply put, Best-in-Class AP programs’ two biggest performance advantages are time and money. According to Ardent Partners’ latest research, Best-in-Class businesses have made incredible strides where it counts the most by driving invoice processing costs that are 80% lower and invoice processing times that are 74% faster than their peers. Through the introduction of automation, process efficiencies, and more strategic thinking, top-performing AP groups shine.
One of the key hallmarks of Best-in-Class AP departments is their ability to leverage technology to achieve straight-through-processing (“STP”) of invoices. Straight-through, or “touchless,” processing is defined as an invoice being received, approved, and payment scheduled without any manual intervention on the part of the AP team. There is enormous value in achieving this because straight-through processing is significantly cheaper and faster than any other invoice-approval workflow process and typically results in huge efficiencies from an approval standpoint.
Straight-through processing also results in greater visibility into invoice and payment data, as well as increased accountability for the AP process because the automated invoice approval system “talks” to the relevant databases for POs, contracts, etc. STP also enables a vastly higher number of invoices to be processed. Increasing the percentage of invoices that are processed straight-through also means that exceptions can be handled quicker because of the detailed record keeping and increased data visibility that are hallmarks of highly-automated AP processes.
Best-in-Class AP functions have achieved a 3.2x higher straight-through-processing (“STP”) rate than their peers. Straight-through-processing, a long-desired state of “touchless” invoice processing, is a core component of the Best-in-Class AP group. The top-performing organizations owe this high rate (67.2%) to higher levels of automation adoption and a commitment to using it.
Achieving true, touchless processing of invoices begins with suppliers submitting invoices electronically, and then the invoice data being automatically populated directly into your AP automation solution for automatic matching, routing, and ready-for-pay approval status. Unfortunately, there are still too many paper invoices being submitted by suppliers, just under 50%, according Ardent Partners’ 2020 research. Such a high number of paper invoices eliminates the possibility for many organizations to ever achieving STP and the desired means of reducing all paper and human intervention associated with AP processes for the sake of time, efficiency, and costs. Providing suppliers with the means to submit their invoices electronically is a basic tenet of being able to achieve STP. The good news is that the technology exists today to enable all suppliers to submit their invoices electronically regardless of size, industry, or geography.
Historically, invoices from utility and telecom suppliers were among the most challenging to receive electronically and one of the larger impediments for organizations to achieve higher rates of touchless processing. In an upcoming blog post, I will explore how AP departments are now able to receive these invoices electronically as well.
