CloudX Blog

3 Easy Ways to Get Executive Sponsorship For Your AP System Overhaul

Posted by Chris Cosgrove

Nov 8, 2012 5:51:00 PM

AP System Automation is SWEET!

People are resistant to change...shocker!

If you have kids you know this starts at an early age.  I often try to get my 6 year old son to eat something that did not come out of some kind of foil, wrapper, lidded apparatus, crinkly bag or other pre-packaged vessel.  He has some food allergy issues and that makes matters complex to a degree, though I don'’t think that is the core issue.  When pressed to eat something that is grown in its natural state, conflict is inevitable.  We enter the negotiation zone...…one apple to five gummy bears…...one banana for a bowl of chips…...do you feel my pain? 

The issue could be centered in that people as a whole are predisposed to what they can get or benefit from immediately, forsaking the things that require some delayed gratification.  Selling the idea of Vitamin A and Potassium benefits at a cellular level doesn'’t carry much weight to a grade-schooler in the face of tie-dyed, sugar saturated snacks.  However, in this predictable quid pro quo exercise, we eventually come to terms and work things out, ie. I say, ‘If you don’t eat your (insert health food item)… you don'’t get your (insert junk food item) …end of discussion.”  At which point, capitulation is generally a foregone conclusion, although drudgingly.

Similar to this is the process that many managers undertake when trying to sell their leaders on systems upgrade, process change, improvement initiatives...…you name it.

The core of the issue is change….  We hate change.  But change is what’'s necessary to improve.

So the key to selling change upwards in your organization is to paint a vivid and broad picture of what a post-change environment will look like.  Lots of upside and lots of bennies will make the change efforts worthwhile. …

 

Here are three ways to set yourself up for success in selling improvement initiatives to executives in your organization.

AP System Visibility

 1.  See the world from their view.

It can be difficult to shift our thinking away from the things that drive us on a day to day basis.  In Accounts Payable management or supervision, items like invoice entry accuracy and staff productivity are high on the priority list.  Another pressing issue is getting rid of manual processes or expediting (surviving) month and quarter end closes.  All of these are undergirded by a couple driving factors…...time (or lack thereof) and precision (avoiding negative outcomes).

 

When you shift your view from the day to day, to the look above the clouds, you can see that while your views are relevant and pressing, the boss may have other priorities and concerns…, such as making sure your company is maintaining its margins in the face of competition or economic turbulence.  Another item for them could be maximizing how the organization/Treasury is putting the working capital in the hopper to use.

 

The sooner you align the benefits of Accounts Payable improvement to his/her priorities in a compelling and relevant way…, the sooner you’ll be on a track to getting the nod to pursue the initiative.

 AP System Map

2. Map your processes, identify risks, and benchmark your departmental efficiency.

 

Let’s face it...…finance execs like numbers.  Who knew?  These are the types of people who crave opportunities to choose their own adventure based on opportunities to gain with minimal downsides (arbitrage anyone?)… and that’s where your due diligence is going to pay dividends for you.  

 

If you don’t know basic benchmark information within your AP department, then your boss doesn'’t have a prayer of knowing.  Further, …if you don’t know how you rank compared to industry standards or peers, you'’re even worse off.

 

Invest the time in nailing this data down and you can  begin the project scoring process.

Here are a few items to measure:

 

  • Days Payable Outstanding? – What’s your average?
  • % of invoices that go straight through receipt to approval?
  • % of PO vs Non-PO invoices?
  • Cost Per Invoice?
  • % of invoices with discounts captured?
  • % of invoices with late fees?
  • % of duplicate invoices paid?
  • # invoices processed per FTE?

 Rank score your AP System

 

3.  Rank Score your AP improvement initiative from a cost-benefit  and achievability perspective

 

The whole key to this analysis is to take the elements of the benchmarking exercise and overlay that with clear expectations that are achievable (timely as in not eons to pull off) and realistic for any improvement initiatives.  Namely, you need to list out exactly what you expect to accomplish and map out the shortest path to glory.

 

Another key is to not just factor in the hard dollar impacts, but the not so obvious ones as well….  The pains that you’'ve been living with all along, for example.  Is there an issue with centralizing your invoice receipt…?  Are you wasting a ton of time and money on interoffice mail…?  Does your staff get pounded on the phone with supplier calls?  …What are the grievances that everybody has, but sometimes get ignored because "that'’s the way it’'s always been…"?  The more you identify these issues and show them in your rank score for achievability off the proverbial AP Christmas wish-list you’ll make it easier to get the nod to make change happen.

 

In the case of selling this upwards you might want to try the conveying the achievability of the following goals:

 

  1. Increase our FTE invoice processing productivity by 50% within 2 Months
  2. Decrease our invoice entry error rate by 70% within 1 month
  3. Improve our early payment discount capture rate to 30% from 10% within 3 months and amounting to approximately, $50k per month recouped
  4.  Reduce supplier calls by 70% through vendor portal self service within 3 months
  5. Centralize all invoices to AP within 2 months
  6. etc.

 

Wrapping It Up

So, if you'’re in the camp where you feel you may be ripe for change, but you need to get your arms around it a little more, …we'’d advocate starting a benchmark assessment immediately… which you can conveniently do below.

As in the case of my son, you have to have the sense to sweeten the deal for all the stakeholders involved, especially executive leadership, to get heavy lifting accomplished in terms of systems upgrade and organizational change management.

In retrospect, that Mary Poppins lady was on to something...a spoonful (or truckload) of sugar certainly does make the medicine go down.

 

 

 

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Topics: Accounts Payable Process, Accounts Payable Automation, Improve Accounts Payable, ap system, ap services, benchmarking

3 Huge Costs to Cut Out of Your AP System

Posted by Chris Cosgrove

Oct 29, 2012 6:30:00 AM

Q3 US Economic Results

Economy - AP System

Recent US Economic data indicates that the US economy grew at a 2% annual rate for the third quarter.  While better than the tepid results of the second quarter’s staggering 1.2% annual growth rate, the number has still been labeled lackluster and underwhelming.  In a blog post from the WSJ on 10/26/2012, U.S. GDP Growth: Slam Dunk on a 3 Foot Hoop,  Kathleen Madigan writes, “Even when beating expectations, the U.S. economy looks underwhelming.  Real gross domestic product grew at a 2% annual rate in the third quarter, a bit better than the 1.8% advance projected. But investors and economists were unimpressed, and fundamentals suggest growth won’t pick up in the near term.”  That’s somewhat unnerving given the prolonged period in which the US economy has sputtered and consistently delivered unenviable results.  With that said, it continues to underscore the value and priority that winning organizations need to take in order to ensure positive outcomes in maintaining their profit margins.

 

 

Counting the Costs

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One of the primary ways that we endeavor to do this is through process re-engineering.  Inefficient and poorly managed processes lead to a bevy of issues that end up costing you dearly.   

What types of costs you say…? I’m glad you asked. For starters:

  1. Cost of the process

    What are the cost components from a labor, systems, communication, & facilities perspective that are required to sustain the process and drive it forward?  - Without looking at these with a hard eye and under a focused lense, you can lose ground in the opportunity to trim excess out of the equation.

     

  2. Opportunity costs

    What penalties are imposed for a slow process or missed deadline?  What discounts are missed because of an inability to turn a deliverable around quickly?  This is a cost type that has the potential to be a double negative, somewhat akin to a 6 point swing in basketball (Mrs. Madigan started the basketball analogy so I’ve got to run with it), when your ace shooting guard bricks a three, only to see the opponents team get the ball and drain a three-ball on you.  Not only do you miss the opportunity to score points (capturing discounts, completing process prior to a deadline), but you have points scored against you when you blow it (late fees, penalties).

     
  3. Intangible costs

    What costs impact your personnel or organizational morale?  Arduous, burdened processes tend to negatively impact those on whom the process rests.  In the case of transactional documents, processors, supervisors, and managers, can be severely affected by inefficient and painful processes.  This is often self-evident with high levels of turnover in these types of roles as job satisfaction tends to wane in the face of monotonous, soul-crushing repetition, and additional pressurization from being required to do more with less resources.

 

Accounts Payable as a Primo Example

primo

 

A prime example of this is a poorly managed and manual Accounts Payable process.

Every one of these points can be brought to bear in this process and made completely relatable.

With that said, now is the time for all good men (and women) to come to the aid of the party (or their company, whatever works for you).

By embracing a philosophy of continuous improvement or at least being willing to assess where you’re at today and review it against relevant benchmark information, you can establish a basis for determining what stinks, what’s decent, and what’s great with respect to your findings.  With that in hand, you can set your compass heading to improve and begin the process of looking for ways to create efficiencies and rid yourself of underperformance. 

Change can be tough…but change can be worth it…and that is the item you have to contend with and determine what is worth changing in my process and where can we get compelling and sustainable victories from all three of those costing perspectives.

If more companies do this, especially with respect to AP, they’ll reap the rewards that process efficiency delivers…cost reductions, profitability gains, visibility to the process, ease of burden on staff…the list goes on.

More importantly to the macro situation that the US is faced with, baseline improvements to the operations side of the house will help improve the profitability of our economy as a whole and get us back on track to being the driving economic engine of the free world.  This may not have the same glamour associated with increasing sales revenues, but the endgame is often the same, where Revenues-Expenses= Profit.

 

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Topics: AP Process, Improve Accounts Payable, ap system, AP Process, accounts payable system, benchmarking

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