CloudX Blog

Post Accounts Payable Automation Productivity Metrics Should Look Like This!

Posted by Chris Cosgrove

Jun 14, 2013 3:32:00 PM

Accounts Payable Automation has more in common with the B-24 than you might think!

Exactly how is AP Automation likened to the B-24?

During World War II, the United States Armed Forces turned to an interesting manufacturing and supply chain expert in order to beef up their production rates of military aircraft.  Henry Ford, the Founder of Ford Motor Company, at 81 years of age pioneered Willow Run, a massive facility boasting a one mile long assembly line production facility for the B-24 Liberator.  At its peak, it was producing one B-24 per hour, a stunning triumph for modern day manufacturing and validation of Ford’s operational prowess.  To this end, many wonder what the effects of Accounts Payable Automation should be upon a process that, in a manual fashion, has remained largely unchanged for decades…and it’s a good question.

 

How many invoices can be processed by a single AP clerk?

 

This obviously depends on the nature of the invoice processing, and for this answer, we’ll turn to some benchmark data courtesy of IOMA.   According to them in their ‘Effects of Automation on AP Operations’ from 2010, they provided two key pieces of insight.

For processors handling 100% of the two following invoice types in a post AP automation environment, the number of invoices processed in a month should be:

 

Purchase Order (PO) Based – 3,647

Non-Purchase Order  Based – 2,263

 

So with that said, figuring out where you stack up is fairly straight-forward.

Follow the steps below to determine how you compare to those metrics and whether you should look at some ways to automate and improve your Accounts Payable process.

 

  1. Determine your PO/Non-PO mix – Simply figure out what % of each category of invoice is being processed by your AP organization.
  2. Determine what your AP clerk processing load is by taking the total volume of invoices per month divided by your total number of AP processors.
  3. By applying your PO/Non-PO mix ratio to the Accounts Payable automation benchmark numbers above, you can figure out what the blended amount per month should be if your environment was automated.
  4. Finally, take your current state level of AP production and subtract it from your specific blended rate benchmark, and this will tell you what your shortfall or surplus is compared to the numbers above.

In most cases, for those operating in a non AP automation environment, the typical processor will handle anywhere between 1,000-1,750 invoices per month from our experience.  In some organizations the number is better and for others, worse.  However, one of the important distinguishing factors is that when we are discussing the role of an AP processor, we’re talking about an agent of the AP organization who is responsible for exception handling, vendor relations, internal liaising with other department heads.  The reason for making the distinction is that we have seen efficient AP operators in a manual AP environment that process upwards of 3,500 PO based invoices a month.  The distinction however is that they are solely utilized in a data entry capacity with zero responsibility for any of the more strategic requirements of a typical AP clerk.

 

The Main Take-Away

 

If you know that your processes are inefficient and that too many physical touches of invoices are occurring, and perhaps other process redundancies are happening, chances are your invoice processing could use an upgrade.  If you haven’t considered Accounts Payable automation before, or if you have and you’ve come to the conclusion that the juice isn’t worth the squeeze or the systems you’ve looked are entirely cost prohibitive, perhaps it’s time to consider a fresh, intelligent, game-changing approach!

 

To learn more about Accounts Payable automation best practices, check out the eBook below!

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Topics: Accounts Payable Process, Accounts Payable Automation, Improve Accounts Payable, Invoice Processing, AP Process, accounts payable best practices, ap automation

Why Your AP Automation Project Was Squashed by the CFO

Posted by Chris Cosgrove

May 31, 2013 12:36:00 PM

 Will you please approve my AP automation project? 

Few things stick with people like rejection. 

 

It’s one of those areas of life that leaves people with vivid memories and can hearken them back to moments of time from years gone by due to the associated pain of those embarrassing moments.  One of the top rejections of 2013 has got to be Jake Davidson, who infamously asked Kate Upton to his prom.  While Ms. Upton ultimately declined on the invite, Jake proceeded to create a social media frenzy that was almost Psy-esque.  With that said, Jake’s boldness should really be commended because it is just such a fearless and carefree attitude that inspires people to greaness.  You always hear the cliché, ‘what would you do if you knew you could not fail?’  Well, Jake, obviously took that to heart on a whim and might’ve made himself the most popular high school senior in the country.  Now you may be thinking…this is stimulating intellectual discourse , but I usually turn to E for the 411. ..what does this have to do with improving and automating Accounts Payable?

 

Everything!

 

You see, many Accounts Payable automation campaings are doomed from the get-go.  One of the things we routinely hear from AP Managers and Finance directors throughout the nation is that we’ve investigated this area for improvement a while back and came to the conclusion that it is just too costly for us.  So, it’s not really a surprise when The Accounts Payable Network releases ‘new’ survey findings in their 2013 AP Benchmarking survey from over 600 participants that suggests that “Fifty-six percent of participants say that getting access to capital expense dollars for process improvements is either very difficult or impossible.”  This isn’t really surprising for a couple basic facts: a. Accounts Payable software is non-core, and as such a secondary or tertiary priority and b. It can be expensive.

 

How expensive?  Another good question.

 

If we’re talking about the components necessary to automate a paper based document process, then you have to look at:

Scanning Hardware

Capture Software – OCR & Distributed Capture Software

Document Management & Workflow Technology

Business Intelligence Technology

Integrations between the EDM & ERP – Vendor & PO Data Pull, EDI, XML, CSV data pushed back to ERP

Servers

IT Personnel

& on …

The bottomline is that you generally can’t get into the full game of automation for less than a few hundred thousand dollars, and that right there is the main reason that many department heads that have boldly attempted to go where no man has gone get shot down by CFOs faster than Jake did by Kate.

So what to do then?  Settle for an inferior, cumbersome Accounts Payable process?  Wail and gnash your teeth while shaking your fist at the heavens? Nah…reserve those antics for March Madness and get on with improving your AP process.

 

Here’s how:

 

We advocate embracing the Document Process Outsourcing revolution.  You can learn more about it here, but the gist of it is pretty simple.  Take a burdened issue like invoice processing, and put a suite of extendable, flexible, and easy to use tools in the cloud to help overlooked and underserved sized companies automate the processes that only the 800 lb gorillas have had the cheese to do.  Wrap additional value based services around that and roll it up in one transactional pricing model so you only pay for what you use, and then make it a fraction of your current state costs.  Oh, yeah…the big benefit for CFOs from this perspective is that with nominal capital investment you can generate immediate ROS (return on services) and stop holding your breath for the fabled ROI (that can beleaguer and take years to see, if ever).

 

Oh, and on another note, dreams do come true.  Just like the kid who flew close to the sun, you can dream of improving your AP processes and actually be able to get it backed by your top brass.  Turns out that Jake didn’t get his night out with Ms. Upton…as she sent her proxy….Ms. Nina Agdal, another Sports Illustrated swimsuit model.  So the next time, you’re pitching AP software and improvements to your CFO, don’t lead with a classy tuxedo vid and roses on Youtube…come at ‘em where it counts…with solid benchmarking, a tight plan, and most importantly a favorable business model that isn’t DOA from the get-go.  Also, focus on the pains felt from an inefficient process across the organization.  View it not just from the perspective of the AP staff, but anyone internally who is tied to the process in some form or fashion, including Purchasing, Approvers, GL Coders, Auditors, Treasury, etc. 

 

To learn more Accounts Payable best practices on automation, check out the eBook below!

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Topics: Accounts Payable Process, Accounts Payable Automation, Improve Accounts Payable, Invoice Processing, accounts payable best practices

Addressing Invoice Scanning in Accounts Payable Automation

Posted by Chris Cosgrove

May 28, 2013 1:26:00 PM

Yoda digs AP automation!

How do we scan (get) our invoices in the AP process?

 

We’re pretty sure this is not a question that Luke Skywalker posed to Yoda in the Dagoba swamps, but based on our experience it is largely subjective based upon your current technology investments and infrastructure and also the strategic direction you’d like to take your back office organization.  How so?  Well, scanning is definitely an additional step in the process of moving a transactional document like an AP invoice for those who are managing entirely manual processes.  (Meaning, if you’re not really willing to give an AP automation initiative the old college try, you’re probably better off leaving it in the manual state…you don’t want a Frankenstein hybrid of old and new parts, but rather, take the time to invest in a fully functional automation solution). From an outsider’s perspective it may seem unmeritorious because it adds additional labor effort and processing time, but the mitigating factor is that a quality scanned image can be largely converted to data via an Advanced OCR based capture process, making the scanning a necessary step to true process acceleration.  Without the OCR, scanning is largely done just to get rid of paper filing, but little gets done to improve the process.  While, that’s still a step in the right direction to living the paper-free back office dream, most companies would like to have their cake and eat it too by having the paper-free back office and without necessitating data entry or scanning.

So coming back to the strategic direction, a thought to consider is where is your company at in terms of establishing a Shared Services environment.  Most Enterprise level organizations have led the way in creating efficient, centralized processing and customer service centers that are focused to non-core areas like Accounts Payable, Accounts Receivable, Information Technology and many others.  In keeping with this type of approach these types of companies largely have investment dollars to fund the requisite hardware and infrastructure that is required to handle high volume transaction processing.  But many micro, small, and mid-size companies lack the human resources and financial capital needed to transform these types of processes.

 

Options for dealing with the paper:

 

  1. Invest in Scanners – Sure you may not be able to invest in production scanners, and you may not want to unless you can justify the expense against massive amounts of paper volume, but there are many mid range scanners that won’t pile on costs and can deliver solid results.  Check out some of the work-group range products from companies like Fujitsu.
  2. Leverage your Multi-function devices – This can be really helpful for anyone who has a decentralized organizational set up and more specifically for those with a broad geographic footprint.  One of the common themes that we’ve seen in the course of consulting with many retail businesses is that at the franchise or branch level, there is a predisposition to just Fedexing or using a courier to distribute invoices to AP for processing.  Those extra costs and time impacts need not be so deep in your business if you empower your front-line operations to communicate more harmoniously with the back-office teams via image capture at the point of origination.
  3. Document Process Outsourcing is an option – Using a 3rd party can help you improve the end to end process, and rather than embracing either of the two above approaches and having to invest in equipment, some parties are choosing to select a vendor to function as their partner in data conversion.  The simplest way to put is that the DPO (or BPO if you’re comfortable with turning all of your process keys over) provider has the front end conversion hardware, technology, expertise, and labor resources in place to make the front end issues of how to deal with the paper (at least for the Accounts Payable process) a snap.
  4. Deploy a Vendor Portal – You’ll be glad you did if you pull this off correctly.  By getting your vendors to submit their invoices electronically, you accomplish a few things: a. you get invoices uploaded to your process dynamically instead of waiting for the mail and having to scan yourself, b. you make the vendor happy by letting them participate in the process and monitor their invoice statuses, and c. you contribute to a healthier planet by nipping the paper in the bud upstream.

These are just a few ways to improve invoice processing in your organization and is by no means exhaustive.  Another alternative, as mentioned above is a full Business Process Outsourcing approach, though this is typically done by only the largest organizations, and with the understanding of ceding certain process contrls

 

To learn more about Accounts Payable software vs e-Invoicing and other Accounts Payable best practices check out our eBook below!

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Topics: Accounts Payable Automation, Improve Accounts Payable, Invoice Processing, accounts payable software, accounts payable best practices, vendor portal, document process outsourcing, ap automation

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