Inefficiency has always been a challenge for the accounts payable (AP) function. But the disruption caused by the shift to remote working has exposed and exacerbated shortcomings in the way that AP departments operate. As a result, AP staff are working longer hours. It’s harder for AP departments to pay invoices on time. Accessing information is more complicated. And duplicate payments and other errors and mistakes are taking a big bite out of reduced profit margins — all of which makes it even more shocking that most companies have automated less than half of their back-office functions.
Broken and inconsistent processes are largely to blame for this friction in the invoice-to-pay cycle. However, by combining end-to-end automation with consistent processes, AP departments of any size and in any industry can eliminate the friction in their invoice-to-pay lifecycle and achieve top performance.
How, exactly, does a business reach “top performer” status? This IOFM white paper lays it all out for you. But, to save some time, we’ve narrowed down the most important tips, insights and strategies right here in this blog.
Where does your AP department stand?
That’s not to say that AP departments have finally rid paper and manual processes from their operations. IOFM recommends that AP departments consider the progress they have made in automating their processes end-to-end, including invoice receipt, data capture, invoice approval, invoice and PO matching, and supplier payments. Here’s how to measure where you stand:
- No automation is defined as having automated none of these processes.
- Low automation is defined as having automated no more than two of these processes.
- Significant automation is defined as having automated three of these processes.
- End-to-end automation is defined as having automated at least three of these processes.
Consistency is key.
To become a top-performer, AP departments must first fix their processes to achieve consistency. Departments with inconsistent processes are likely to rely on desk-level decision-making where processors set their own priorities and methods. Accounts payable departments that rely on desk-level decision-making – even those with automation – are among the worst performers in their peer group. But department-level decision-making isn’t enough for top performance. Accounts payable departments must have consistent decision-making across all processes, so AP teams can operate in a continuous process improvement loop. IOFM calls this peak level of process maturity P2P decision-making.
How to improve your process consistency.
The idea of becoming a top performer with consistent processes can be daunting, particularly for AP departments that are only beginning their automation and process improvement journey.
Here is IOFM’s step-by-step plan for moving your department towards process consistency.
- Get strategic alignment. Achieving process consistency starts with assessing where you stand and defining goals. These goals will be the basis for a mission and vision statement to guide your AP team. Try to align your department’s goals with those of procurement and finance to ensure that you are supporting and not undermining one another.
- Put a governance team in place. Every process needs someone empowered to make and enforce changes. A governance team is invaluable in helping a process owner prioritise changes and execute continuous improvements.
- Visualise your processes. Achieving top performance requires AP departments to uncover all the processes that may be slowing it down. Scope your AP processes from beginning to end, and use all the information that you have collected to create a spreadsheet detailing everything necessary to execute each step that is crucial to your AP process.
- Manage change. Change starts with translating your goals into actionable steps. Then you must communicate the changes with your team to ensure that no one is caught by surprise. As you implement the changes, be sure to capture any best practices or lessons learned that emerge and share them with your entire team to celebrate and replicate the good outcomes.
- Apply what you’ve learned. Top performers operate in a continuous process improvement loop. This starts with aligning your process improvement goals with leadership’s definition of success. Quantify performance targets and goals and identify and define process measures. Then, collect data to measure your progress. Compare your results to those of your peers. Plan how you will address results that fall short of world-class performance. Finally, continuously improve your processes based on the data that you learn.
On your way towards top performance.
An organisation cannot improve what it cannot measure, the old saying goes. And you might be wondering how to measure your progress in becoming a top performer. IOFM benchmark data has uncovered several metrics that are critical to top AP performance. These are the AP metrics you need to be measuring:
- Cost to process an invoice
- Number of invoices per FTE
- Percentage of invoices paid on time
- PO first-pass match rates
- Share of transactions requiring corrections
These are the metrics that will have the biggest impact on your ability to become a top performer.
Take the next step toward top performance.
End-to-end automation and consistent processes eliminate inefficiency. Because every phase of processing is made electronic, the need for any human data entry, fixing typos and other errors, and manual storage and filing is eliminated. Businesses save time and money with invoice receipt and data capture, as well as benefit from company complaint and standardised approval workflow.
Want to read the full IOFM white paper and get all the details on how to be an AP top performer? Download the white paper now!
-Written by, Taylor Bucher