The performance of the typical AP function is rooted in its ability to effectively manage the many facets of the invoice and payment processes. To effectively drive AP forward into the new normal, enterprises must actively gauge, measure, and analyze their AP performance across a series of key performance indicators to use as a means to establish a performance and business impact baseline and then improve upon them. The average performance across the primary AP-related metrics continue to get better, while still leaving great room for improvement.
As the 2021 AP Benchmarks show, the performance of the average AP function continues to improve (as indicated by the Green Arrow) in some areas and remain constant or flat (as indicated by the Blue Dash) in others. Nonetheless, the average AP department’s ability to become a critical business function within the enterprise is finally within sight, yet not within immediate reach. Additionally, the slower gains made within several metrics are keeping the average AP department from realizing its full potential.
- Cost and time, together, are formidable. For years, this adage rang true: it takes a business much too long to process a single invoice while costing it too much money to do so. Unfortunately, this is still the name of the game when it comes to the present and future of AP. Applying a $9.25 average invoice processing cost to the thousands or tens of thousands (or more) of invoices processed each month by AP can be deflating. Simply put, the average AP operation is still handling too much paper and spending too much of their time focused on the simplest of tasks within the greater finance group. And as a result, they are missing the ability to impact cash flow and capture discounts while leaving the door open for potential fraud.
- Accentuate the positive – supplier enablement is becoming a bigger priority, finally. Perhaps the most significant by-product of the COVID pandemic (as it relates to business) was a sharp decrease of in-person work in traditional office structures, meaning that more and more businesses required digitization to move forward in an uncertain time. Although less than half (44%) of the average organization’s total supplier base has been set up to send and receive electronic communications (including, most importantly, invoices), there represents a critical gap that most organizations still need to address.
- Eliminate the negative – understand that exceptions must be targeted and dramatically reduced. While this figure is lower than it has been in recent years, AP groups still have a long way to go to solve their invoice exception problem. Invoice exceptions, in fact, can be looked at as the biggest single reason why so many of the performance benchmarks are trending flat. The amount of staff time dealing with invoice exceptions is costly, but it also delays payments, disrupts cash flow, and keeps the AP team from focusing on higher-leverage/more strategic activities.
Pingback: Payables Place | ePayables 2021: Best-in-Class Accounts Payable Performance