When it comes to accounts payable priorities, I’m reminded of a meme I saw recently “I don’t want to enter 2018 with the same problems I had in 2017.”
If you don’t want 2018 to be “more of the same” in Accounts Payable (AP), then some serious prioritization – and action – is in order. Here are four top priorities that should drive your strategy and decisions in the coming year.
Reduce Invoice-processing Costs
Yes, you probably had this item heading up your list last year, too. Sadly, it hasn’t changed for most, with 63% of all AP teams identifying cost reduction as a top priority. The problem is two-fold – paper invoices and manual processing. According to the Institute of Financial Management (IOFM), less than one quarter of accounts payable departments describe their invoice processes as being highly automated. Paper invoices and manual steps invariably make processing slow, costly, cumbersome, and error prone. Automation, however, can streamline invoice processing starting from the time of receipt through capture, matching, coding, routing, and approvals while reducing costs at every step. Automating AP processes can reduce processing costs by an astonishing 82% – from $15.00 to $2.74 per invoice.
Remember the Payment Part of the Process
It’s easy to focus solely on improving the invoice processing part of the AP function – but the payment aspect is equally important. As Ardent Partners notes, “AP can dramatically improve controls, accuracy, and access to data by paying electronically. With all the different forms of ePayments that are available, taking a portfolio approach that utilizes the right form of payment for the right supplier or spend category has become an industry best practice. Optimizing the various forms of payments has the potential to deliver more efficiency, higher savings, and better relationships with suppliers.”
Improve Reporting and Analytics
More than one third of AP organizations (35%) name reporting and analytics as a top priority, and more than two thirds (69%) of controllers cite improved financial visibility as their number one AP priority. The bottom line is that AP professionals want – and absolutely must have – real-time visibility into all financial data in order to gain business intelligence and strategic insights. For example, advanced reporting and analytics can help you:
- Identify trends and bottlenecks in AP processes
- Monitor the volume and value of invoices, related documents, and payments
- Improve cash analysis, cash planning, and liquidity management
- Speed up accrual reporting on financial reports
- Lower security and compliance risk by providing an audit trail of all activities
- Improve fraud monitoring and prevention
Transform AP into a Profit Center
Almost a third of AP organizations (31%) are currently using business/payment networks. These networks can centralize purchasing, supplier management, invoicing, communication, and payment activity. But the payment network can provide a benefit above and beyond these unquestioned advantages: if the payment network facilitates rebates for early payment, it can literally transform AP from a cost center into a profit center. One of I’ve seen specific instances of organizations that have earned $270K in cash-back rebates in one year on $82 million in ACH transactions. Another achieved $800K cash-back rebates in one year on $140 million in ACH transactions.
Make 2018 the year of AP. Continue to deliver on the core functions, but within the enterprise context. Doing so will make it possible to move beyond simply being a back office function that is isolated and ignored, to a strategic voice at the table, contributing value across the organization.
Stephanie McCarthy is an experienced technology marketing professional with deep experience in the payments and global business solutions industries.