5 Key Metrics to Empower Your Accounts Payable Organization

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5 Key Metrics that will Empower Your AP Organization Document The most vulnerable area of accounting in any company is the outflow of cash resources – the accounts payable function. Learn which KPIs you need to measure and how to improve them. AP Automation makes them easy to track.

Text of 5 Key Metrics to Empower Your Accounts Payable Organization

  • THESE 5 KEY METRICS WILL EMPOWER YOUR ACCOUNTS PAYABLE ORGANIZATION AP AUTOMATION MAKES THEM EASY TO MEASURE AND TRACK
  • THE STRATEGIC IMPORTANCE OF ACCOUNTS PAYABLE The most vulnerable area of accounting in any company is the outow of cash resources the accounts payable function. How is this empowerment possible? As companies realize this, they are nding that empowering the accounts payable function enables it to leave behind its costly manual, taskdriven, accounting-centric image and take on strategic importance even as a source of additional revenue and that this empowerment transforms the way people work within the organization.
  • EMPOWERMENT STARTS WITH MEASUREMENT You cannot change what you cannot see. Accounting departments that improve efciencies do so by embracing technology. Accounting departments are always busy measuring external business activity but they rarely stop to measure their own, or to think about empowering the spenders outside of accounting to leverage efciencies.
  • AP SOLUTIONS HAVE BEEN DEVELOPED TO MAXIMIZE EFFICIENCY AP Automation empowers you with tools for: dening KPIs (key performance indicators), measuring and reporting on those KPIs for your Accounts Payable process. What are the key metrics you should be measuring?
  • 5 CRITICAL PERFORMANCE INDICATORS FOR ACCOUNTS PAYABLE 1. Cost per Invoice 2. Invoice Processing Speed 3. Productivity per Team Member 4. Variance Analysis Correction Rate 5. PO Matching Speed
  • KPI #1 COST PER INVOICE How much do you spend today to process an AP invoice? Receiving, processing, approving and paying a vendors invoice involves a lot of touch-points with direct or opportunity cost. Cost of employee time spent pushing paper through approval process Cost of check processing and mailing Copying, printing and mailing costs Ofce space and storage Missed discounts, late payment fees and duplicate payment Fraud, errors and lost correction time
  • COMPANIES THAT USE AP AUTOMATION SAVE 80% ON THEIR COST PER INVOICE Organizations Performance* Top 20% - Best in Class $7.78 average cost to process an invoice from receipt through settlement Middle 50% - Industry Average $12.05 Bottom 30% - Laggards $37.45 Full procure-to-pay further reduces these costs with integrated E-Payments. Where does your organization t? Can you measure? *Aberdeen Group, 2011. E-Payables 2011. Efficiency, Visibility & Collaboration in the Financial Supply Chain.
  • KPI #2 INVOICE PROCESSING SPEED How long do your invoices take to travel through the approval channels for payment to be completed? Organizations Performance* Top 20% - Best in Class 5.3 days to process an invoice from receipt through settlement Middle 50% - Industry Average 10.2 days Bottom 30% - Laggards 24.5 days How does your processing speed compare to companies that are using AP Automation? *Aberdeen Group, 2011. E-Payables 2011. Efficiency, Visibility & Collaboration in the Financial Supply Chain.
  • FASTER INVOICE PROCESSING SPEED CAPTURES EARLY PAYMENT DISCOUNTS Organizations Performance* Top 20% - Best in Class 90% capture rate for available early payment discounts Middle 50% - Industry Average 47% capture rate Bottom 30% - Laggards 18% capture rate Is your early payment discount capture rate where you want it? *Aberdeen Group, 2012. AP Invoice Management in a Networked Economy.
  • KPI #3 PRODUCTIVITY PER TEAM MEMBER Take the number of all your accounts payable invoices per month and divides that by your FTE and then factor in who does what in the process. Is each member of your team equally productive? How can you measure? For example: 36,000 invoices annually with 3 accounts payable staff is 1,000/month/ FTE. But you must factor in that only 75% of the steps are completed by the AP Clerks and the rest are non-accounting staff. Your FTE is really 3.75 which lowers that KPI to 800 invoices per month.
  • PRODUCTIVITY PER TEAM MEMBER Industry standard in a manual accounts payable environment averages around 750-800 invoices per month. With AP Automation, you can expect to double this number. Measure what you are doing today and be condent that this will double through automation with a system like BeanworksAP You get the added benet of KPIs produced by team member with clear records of activity that enable you to improve productivity
  • KPI #4 VARIANCE ANALYSIS: CORRECTION RATE Are you line items coded to the correct budget item? Do you have the right eyes reviewing the invoice? Who controls where the invoice goes? Can you see it while it is in the process? How do you manage split invoices? Are invoices being processed and paid twice? Data Entry Errors: Why are they happening? How can you stop them from occurring? Start by tracking your month-end variance error corrections.
  • VARIANCE ANALYSIS With AP Automation, your variance report is in place and reects the real-time situation. An automated process automatically ags duplicate invoices for you. Workow automation allows you to preprogram where invoices go and to instantly see who has them Automation ensures the right set of eyes have approved your AP before anything is transferred into your account system
  • KPI #5 PO MATCHING SPEED Invoices are typically grouped into two types: Purchase order-based invoices Invoices with no purchase order How long does it take to accurately match your POs to invoices today? What is your exception rate? When an invoice arrives, if a fully-coded purchase order is associated with that invoice, the process should be simple and easy. In paper-based systems however, POs are often added as an afterthought to make accounting happy. This manual process provides little control and no visibility for a companys committed spend.
  • PO MATCHING SPEED With an automated procure-topay process POs are matched automatically to invoices. Exceptions rates will decline dramatically re-route for correction. Auto-matching enables better control of your cash ow and allows you to take advantage of early payment discounts. and in parallel with the ability to quickly
  • 5 CRITICAL KPIS IN ACCOUNTS PAYABLE Compare your KPIs to these Best-in-Class users of AP Automation Software Key Performance Indicator Target with AP Automation 1 Cost per invoice through to payment Under $5 2 Invoice processing speed receipt to payment Under 4 days 3 Productivity per team member Expect to double this metric 4 Variance analysis correction rate From current rate to negligible 5 PO matching speed Auto-matching is instant and accurate
  • AP AUTOMATION IMPROVES YOUR KPIS BY ELIMINATING
  • SUMMARY AP Automation solutions enable your accounts payable department to get Best-In-Class results Solutions such as cloud-based AP automation BeanworksAP track and measure these KPIs on a daily basis With this information, comes the empowerment to manage and modify processes to reach optimal efciency
  • A TOUCHLESS AP AUTOMATION SOLUTION BENEFITS MANY AREAS Maximize supplier discounts 2% per month adds up Integration with E-Payments reduces time and costs further Import data versus manually keying it into your accounting system Give your approvers and spenders mobile access to help make faster and more informed decisions Get it right BEFORE it gets recorded as a liability STOP FRAUD and make your auditors happy!
  • KEY POINTS TO CONSIDER WHEN ASSESSING AP AUTOMATION SOLUTIONS 1. How congurable is it? Will it work with your workow? Or will you have to change your processes? 2. Does it handle multiple companies? Do you have manage more than one legal entity? Can you see all that spend in one easy place or will you have to manage multiple logins? 3. Does it have an intuitive customer interface? Will non-accountants nd it easy-to-use? 4. Is the solution cloud-based? Can you access it anywhere, anytime? 5. Is there a mobile application for your travelling invoice approvers? 6. Is there a simple dashboard for reporting on your team metrics at your ngertips? 7. Can you access critical accounting information quickly when you need it? 8. Does the solution provide the capability to manage full Procure-toPayment?
  • FIND OUT MORE ABOUT HOW AUTOMATION CAN EMPOWER YOUR AP DEPARTMENT Contact: Beanworks Solutions Inc. www.beanworks.com info@beanworks.com Toll-free: 877-959-2326 x150