Today’s article is by Vishal Patel, Research Director, ePayables at Ardent Partners.
Ardent Partners has initiated its technology coverage with the launch of the ePayables SMARTSet™ – a low-cost, comprehensive set of research tools and templates designed to guide organizations though the process of automating their processes and selecting the best-fit solutions for their specific requirements and budget (we describe the ePayables SMARTset here). Last time, Vishal discussed the ePayables Business Case Template on CPO Rising. Today, Vishal will discuss the second tool in the series, the ROI Calculator (link to new report).
Investing in AP Automation Tools (a.k.a. ePayables)
The case for AP automation, although not a complex one, is one that must be made with adequate supporting information, solid research, and thorough financial analysis. AP automation allows organizations to generate savings and efficiencies by reducing the percentage of invoices that are received, processed and paid utilizing manual methods (i.e., paper based systems). Automation also enables the capture of key invoice and payment data to significantly improve the level of visibility, impacting not only AP but procurement and finance. A large part of the initial benefits of AP automation come from a more efficient use of AP staff. The number of invoices processed per staff member will increase considerably with the use of an automated system. With features such as ‘straight-through’ processing, AP’s main function will be to manage exceptions and determine their root cause, as opposed to more tactical responsibilities. AP’s role will become more strategic and necessary to the finance and/or treasury groups as they take advantage of the improved visibility into invoices and payments to implement more sophisticated cash management strategies.
These are just some of the benefits of automating AP, so, why are enterprises still utilizing manual and paper-based systems? One challenge is that an AP automation project may not be a top priority within an enterprise – it generally falls to the AP team to find and sell a sponsor and then another before then crafting a compelling argument that justifies an investment. Our goal with the business case and ROI calculator (and the entire ePayables SMARTSet) is to help AP teams prepare a clear and compelling business case for an investment in specific solutions and will help them build an ROI (“Return on Investment”) model that is specific to their planned investment.
ePayables ROI Calculator
One of the most important aspects of any business case is the financial analysis that supports it. While competing projects can have very different requirements and benefits, “Return on Investment” is one measure that allows enterprises to compare projects in an apples-to apples way. ROI is a performance measure used to evaluate the efficiency of an investment and is helpful for use in comparing the relative efficiency of a number of different investments. Ardent’s new Calculator also provides a Project IRR, a Net Present Value (NPV), and an estimated Project Payback Period.
This interactive research tool will help Accounts Payable (“AP”) leaders/teams calculate a Return on Investment (“ROI”) for an ePayables (AP Automation) solution. This ROI Calculator helps AP teams organize and aggregate their current costs, develop an investment budget, estimate potential gains or benefits from the ePayables solution, and calculate an expected return on the investment made in the solution(s). The returns are expressed as a variety of financial metrics including a Three-Year ROI, a Project IRR, a Net Present Value (NPV) , and an estimated Project Payback Period. This ROI Calculator also enables scenario analysis so teams can test optimistic and pessimistic outcomes and understand where the most leverage in their ePayables initiative exists so they can develop a plan that maximizes returns. This tool evaluates the potential investment over a three-year period, which is the industry-standard period of time to evaluate a technology investment.
The tool includes ten interactive worksheets to help AP leaders/teams present a comprehensive analysis of the potential investment opportunities. While the final output is very detailed, the calculator was designed to be highly intuitive and easy-to-use. Each worksheet contains detailed instructions to guides users through the entire process in an efficient manner. As an added value, this ROI Calculator contains embedded Ardent Partners’ Accounts Payable market research data and benchmark statistics to serve as a reference or proxy in making certain estimates and calculations.
The ROI Calculator can be accessed here.
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