Accounts payable is one department in any organization that should be relatively easy to measure for effectiveness. Factors such as rate of invoice turnover, number of invoices correctly processed and others can be expressed numerically with little trouble if the data is properly recorded and readily available.
The importance of evaluating effectiveness should be obvious; improvements are impossible without regular evaluation of the current process used. Levvel (previously Paystream Advisors) offers seven metrics for measuring effectiveness in the accounts payable department in the article, “Seven Metrics To Drive AP Process Improvement.”
One of the biggest obstacles to smooth invoice processing daily is the infamous invoice exception. Untold time and money has been spent reworking invoices that cannot be properly matched. How invoice exceptions are handled is a major key to greater effectiveness in the accounts payable process.
The Most Common Exceptions
According to survey data, there are three main areas where exceptions often occur. These manage to throw a stick in the otherwise smooth wheel of accounts payable invoicing daily. The worst offenders are:
- lack of a valid purchase order
- differences between product quantities or prices
- goods that have been invoiced but never received
Easier Exception Handling
One of the areas where Accounts Payable Automation excels is in streamlining the way exceptions can be handled. The receipt of a valid document from the vendor need no longer be a major concern, since all purchase order information can be transmitted electronically without the need for paper documents. Electronic transmittal is faster and results in less manual errors.
Electronic Invoicing means that discrepancies between product quantities and prices are highlighted for easier discovery. They can be handled by authorized personnel in the moment as they occur, on-site or even from a remote location. Because all vendor purchase orders are archived, vendors who produce the most exceptions can be flagged for an inquiry into the source of the problem. Electronic perimeters can be altered if needed on a per-vendor basis, to customize the process and minimize the number of payment exceptions.
AP Automation provides much greater transparency between departments as well. The purchase-order-to-payment-process can be tracked with greater efficiency than in previous manual processes. This should virtually eliminate the problem of invoicing goods that have not been received.
More Efficient Payment Methods
In addition to the above, Dynamic Discounting as part of the AP automation process is a highly efficient method of invoice payment. It benefits both sides of the purchase equation, making the entire invoicing process smoother. The buyer benefits from sliding payment discounts, while the supplier can count on timely payments for goods and services.
What remains is simply for accounts payable personnel to utilize the tools that are already available to evaluate invoice processing and manage exceptions better. Although electronic invoicing provides all the tools needed, the human element is still an important part of increasing efficiency in accounts payable invoice handling.