It is with great pleasure that Ardent Partners announces the publication of its latest state of accounts payable (“AP”) research report—“ePayables 2015: Higher Ground.” Like the annual reports that came before it, the 2015 ePayables report focuses on the state of the AP function as well as assessing how AP teams leverage ePayables solutions to improve business results and offering up Best-in-Class metrics that allow readers to benchmark their own operations against top performers. (The report is available for download here, here, here, here, and here.)
AP’s Top Challenge in 2015
One of the first steps in transforming any business process, no matter the department, is understanding the project’s specific challenges. In the case of transforming the accounts payable workflow, many of those challenges can be traced back to the manual, paper-based setup that many AP teams currently have in their organizations. These manual processes are, by their nature, highly inefficient and costly to the enterprise.
There are few situations where this inefficiency is more apparent than in handling invoice exceptions, which 48% of respondents to Ardent’s ePayables 2015 survey stated was the top challenge facing the AP team. Exceptions can occur for the simplest of reasons, with the most common one being a discrepancy between the invoice and the purchase order (“PO”). Other causes include bottlenecks in the invoice approval process and an incorrect PO.
Why are Exceptions Such a Challenge?
Every exception slows down the AP process and makes the invoice more costly to resolve than the typical invoice. Moreover, paper-based manual workflows make resolving invoice issues much more challenging because it is not a simple matter to find the required information. If, for example, the AP team needs to go back to a paper contract for resolution, there is no telling where that paper contract resides or how long it will take for AP to get the document and resolve the exception.
Keep in mind that the AP process is designed to operate as a smooth, efficient workflow that runs straight through without hesitation or delay. When an exception occurs, whether it is for something as innocuous as a missing zip code or an altered price, the process derails and several dominos begin to fall: supplier payments are delayed, critical financial data is incomplete, and internal stakeholders start to see gaps in the department—to name a few.
How to Reduce Exceptions in the AP Process
Reducing exceptions in the AP process begins with understanding the biggest problem areas. This requires improved exception handling and root-cause analysis, typically achieved through automation, which can help AP teams uncover why exceptions occur and how best to prevent the same ones from happening repeatedly.
Improving exception handling and root-cause analysis can result in better AP performance for a few reasons. Getting better at handling exceptions means the AP team spends less time with each error, which means the consequences of exceptions are not quite as prolonged as they might be in an AP department that does not handle problems well. Improving root-cause analysis can allow AP to determine what the most common causes of exceptions are, and how to counteract or eliminate the possibility of those exceptions happening again. For example, if the same type of invoice is missing the same information multiple times, good root-cause analysis will be able to determine what is causing the problem and figure out a solution that can be implemented easily and stop that exception from happening again.
Final Thoughts
Moving to the “next level” of departmental performance is not as simple as flipping the proverbial switch. AP faces a number of obstacles to achieving its goals of becoming a strategic value driver for the organization at large. Exceptions, while the most prominent, are by no means the only challenge that AP must surmount. Working on reducing exceptions in the AP process, however, may also end up in AP addressing other challenges, such as high processing costs, lengthy approval times, and delays in receiving the appropriate information. Once AP is able to account for these challenges, the path is open to start transforming the group into one of strategic importance.
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