Several years ago, the structure of accounts payable groups began to shift to more centralized models. Today, centralization remains the preferred operating model with more than 80% of all AP departments operating in a centralized or shared services environment (based on research from Ardent Partners’ latest report, ePayables 2013: AP’s New Dawn, which surveyed 245 AP and finance leaders) A centralized approach has a variety of benefits, such as the elimination of redundant roles and processes, fewer fragmented systems, and the ability to have a more holistic view of the AP process. The adoption of shared services centers has been an increasing trend because they can offer tremendous benefits driven by the centralization of business functions and the reduction of costs but, there are other elements which must be combined with them to fully optimize performance.
Centralization is one of many steps towards transforming an AP organization and improving its performance. 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 scaled. A centralized structure with standardized and automated processes is the foundation upon which the next level of efficiency and visibility within AP is realized. Providing timely and accurate visibility into payables data is a capability that adds tremendous value to the enterprise and should be a goal for every AP department. For example, the ability to know, at any point in time, the total value of all invoices that are coming due over the next 30 days is invaluable. A treasury department would certainly benefit from having access to this level of AP information sooner rather than later. Similarly, knowing the number of invoices that have potential discounts at any given time can help to prioritize processing activities.
Overall, AP’s role is evolving to meet the priorities of the new day. CFOs expect more than operational excellence from their AP function, which has long been considered a back-office cost center. AP is transforming into a strategic business enabler charged with the task to continuously improve efficiency and reduce costs, while strengthening compliance and controls, and ensuring that payments are accurately and quickly reported. However, a question remains: Are enterprises keeping up with this evolution and supporting it adequately through the use of technology? For those on the lower end of the technology spectrum, the challenge is making the case for an investment in more sophisticated technology to begin moving up the spectrum. This will allow for a more strategic focus that can add value as opposed to remaining tactical. For those that are further along the technology spectrum, the challenge is to drive end-user and supplier adoption, improve productivity, reduce exceptions, and strive to continuously improve key performance indicators (e.g., invoice cycle time, invoice backlog, etc.).
ePayables 2013: AP’s New Dawn was underwritten by Bottomline Technologies, ADP, Basware, Hubwoo, US Bank and Ariba
