Ten Signs that Your Payables Group Is Running Late to the Digital Economy
Managing accounts payable transactions at the speed of the Internet offers advantages today that span many dimensions. You can compress your invoice processing cycle time, lower invoice processing costs, virtually eliminate invoice errors, and better manage cash and working capital, to name a few.
In a digital economy, business performance from a payables perspective can be measured by how effectively you interact with your suppliers. This requires a shift in focus, from manual processing to networked payables. A key enabler is the business network, which allows you to connect and collaborate with suppliers in ways that go far beyond what you can achieve with paper payables.
Are you on the fast track to networked payables? Here are ten signs that your accounts payable group may be falling behind.
10. Your go-to commerce tools remain a fax machine, telephone and mail delivery. Low productivity and higher costs are the two most obvious limitations from these tools, but even larger problems result from poor management of cash and working capital, and difficulties with matching invoices to purchase orders or contracts.
9. Your procurement and accounts payable organizations aren’t on speaking terms. Processing an invoice isn’t an isolated activity, but part of a larger procure-to-pay (or source-to-settle) process. The ability to link invoices to purchase orders, contracts and service entry sheets, and enable suppliers to invoice against these key transaction documents, deliver new processing potential that can dramatically impact business performance. To make this happen, you need a close working relationship between procurement and AP.
8. Lengthy invoice processing cycle. Research data shows that poor performers can take weeks to approve a paper invoice. When the process includes mailing an invoice to a remote location before it gets to accounts payable, that cycle time can be longer, and increase the chances of lost invoices and processing duplicates.
7. Double-digit invoice exception rates. Invoices with errors and exceptions are the most costly invoices to process. Ballpark estimates range from 2X to 10X the cost of a clean invoice. Focusing AP staff on exception management leaves little time for driving suppliers to a networked payables process, where validation rules in the network can handle invoice exceptions for you. A networked payable process that helps suppliers submit clean invoices frees up more time in AP for high-value tasks, such as working with procurement to enforce compliance and identifying early payment discount opportunities.
6. Your business network is designed for processing invoices only. That ignores the opportunity to improve processing of other key documents such as purchase orders, order confirmations, advance ship notices, and payment remittance. The better option is to align with a business network that handles a broad set of transaction documents, not just the invoice.
Next week, we’ll look at the top five signs that AP is running late to the digital economy.