The Competitive Edge with AP Automation

Accounts payable automation and a competitive edge are directly related. The link may not seem immediately evident, but according to Mary Driscoll, a senior researcher at APQC in Houston, there is a connection.

In her article posted on entitled, “Metric of the Month: Accounts Payable Process Cost”, Ms. Driscoll cites the results of a survey taken of 997 business organizations. The visual metric very clearly demonstrates the differences between high-performing and low-performing businesses, with accounts payable process cost per invoice as the single determinant.

Top Performers Pay Lower Processing Costs

Top-performing businesses have reduced their cost per invoice to an average of $4.98, while bottom-performing businesses lag behind at $12.44 average cost per invoice. The average cost was based on a number of internal factors, including monies paid out to personnel, systems and overhead costs, outsourcing charges involved and other miscellaneous expenses. Business performance was measured by volume level and the number of full-time employees required to achieve it.

Ms. Driscoll also found that 62% of labor costs in the AP process are driven by manual intervention – manual intervention that is required to correct numerous human data errors in the process. Human error occurs at both supplier and buyer side of the transaction processing, significantly slowing down payment approval.

The use of electronic invoicing can streamline invoice processing, eliminate the frequency of human data error, and give a company a competitive edge over their immediate business peers. A smoothly running business that saves money in processing costs by using AP automation requires less employees to do the same functions, giving them a distinct advantage over others.

Choices in Electronic Invoicing

Ideally, electronic invoicing procedures would occur at both the supplier and buyer side, bringing human intervention and data errors down to the barest minimum possible. As Ms. Driscoll accurately points out, this cannot always be easily attained.

However, there are many ways invoicing can be digitized to overcome this obstacle. Whether AP automation procedures are fully incorporated at the supplier end or the buyer end, or both, businesses can see a reduction in processing costs. The bonus of electronic invoicing is that dynamic discounting can be initiated to capture early invoice payment discounts.

As Ms. Driscoll mentions in her post, “there are many ways to automate, some requiring more effort and expense than others.” She concludes, “adopting a shared services model and deploying AP automation in that environment is a reliable strategy for wrangling AP costs.” Thus with accounts payable automation most organizations can be assured with proper implementation a winning edge that can give you the advantage.

Referenced Source:

Mary Driscoll: “Metric of the Month: Accounts Payable Process Cost”: June 24, 2015

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