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Forget Jack-o-Lanterns, Consider These 5 Scary Accounts Payable Process Facts

Posted by Chris Cosgrove

Oct 31, 2015 11:22:50 AM

Accounts Payable Process Facts are scarier than these pumpkins!

Forget Punkin Chunkin...This Is Getting Real...

Yeah, if you have kids, they’ve probably been buzzing in your ears for weeks about what costume they’re going to have this year.  Then again, if you’re a candidate for parent of the year, you might’ve been at your local retailer in the 11th hour picking through the dregs of the once vast costume array.  I mean, most kids don’t want to be a zombie pirate or Rocket the raccoon (no offense Guardians of the Galaxy, you’re just not as popular as other Marvel franchises).  Granted, certain scary costumes hold perennial appeal, but in today’s piece, it’s appropriate to look at some things which are scary, ugly, and downright noxious in the Accounts Payable process.  If this post had to have a title from a Zeppelin song, it would have been What Is and What Should Never Be.

 

So, in all their gory detail, here’s a shortlist of five things that are downright frightening about the Accounts Payable process.

 

  1. The average number of invoices with errors is approximately 3.6%(per IOMA).  Now, that number may not seem like a ton, but consider if you organization has $100MM in payables pumping through it over the course of the year.  If $3.6 MM was paid to the wrong vendor, or for the wrong invoice, or in the wrong amount...you get the picture.  The sum of these errors equals a total nightmare for reconciliation in the accounts payable process and unnecessary extra work to unscramble the eggs.

 

  1.  The industries with the highest average cost to process an invoice are Non-Profit / Education at $16.78/invoice and Government at $15.86/invoice.  While this doesn’t really come as a surprise, it underscores the need for accounts payable process improvement across all manner of organizations.  With many corporate leaders having no actual clue to how much their inefficient invoice processing is costing them, it’s high time that they wise up to these ap process leaches and identify ways to make AP strategic and profitable (and no, that is not an oxymoron, it’s entirely possible).

 

  1. Nearly 62% of invoice processing costs are made up of staff labor (per APQC).  The real issue here is how much time is needed to advance an invoice in process.  This includes data entry, data validation (matching the data from the invoice against disparate information like vendor master, PO table, and receiving data), GL coding, and approving.  The bottom line is that the accounts payable process is very fat from a time consumption standpoint and needs to be leaned out if you have any hopes of dropping your processing costs and improving your ap process cycles.

 

  1. For the average company, over 50% of eligible early payment discounts go uncaptured because of inability to process invoices and execute payment in a timely manner (per Aberdeen Research).  This means that significant opportunities to pad the bottom line are squandered, again because of a grotesque ap process.  Ironically, it’s our belief that, given the option, most CFO’s and Treasurer’s would likely want to capture discounts as they tend to be free monies to the payer, when done properly.  This again is a compelling reason to pursue automation.

 

  1. On average, only 32% of companies harness Accounts Payable process dashboards to monitor and optimize performance within their AP departments (per Aberdeen Research).  This only serves to underscore just how in the dark most AP and finance leaders are.  When you consider that most sales and marketing executives have rich insights into their customer and prospect pipelines you can understand that there is a definite gulf between investment in top line revenue generation systems and bottom line, back office systems.  This kind of thinking must be challenged, because AP automation need not be a financial boondoggle, but instead could be a transformative organizational profit center, that catalyzes further finance and operations improvements.



So, hopefully, in reading this you’re not too freaked out with the horror show that is the case in most accounts payable processes.  Given the many options and means available to improve in this area, companies can turn this function into an effective, efficient machine that becomes a critical, strategic asset to the health of the organization.

Free eBook on Unlocking Profit From Transactional Document Processes!

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Topics: Accounts Payable Process, AP Process, Invoice Processing, early payment discount, Data Entry

Accounts Payable Automation Tip: Four Major Challenges of Data Entry

Posted by Chris Cosgrove

Jan 17, 2014 9:40:00 AM

 Eliminating data entry errors from Accounts Payable automation.

Prepare for rapid descent...

 

The age we live in boasts tremendous gains in human intelligence as cited by David Russell Schilling.  In this blog article on www.industrytap.com, he posits that,

 

“Buckminster Fuller created the “Knowledge Doubling Curve”; he noticed that until 1900 human knowledge doubled approximately every century. By the end of World War II knowledge was doubling every 25 years. Today things are not as simple as different types of knowledge have different rates of growth. For example, nanotechnology knowledge is doubling every two years and clinical knowledge every 18 months. But on average human knowledge is doubling every 13 months.  According to IBM, the build out of  the “internet of things” will lead to the doubling of knowledge every 12 hours.”

 

That’s an astonishing rate at which we are making quantum leaps forward in terms of our understanding and discovery of things.  However, in the case of how we communicate and interface data within the context of our work lives, the quantum leaps forward in advanced fields like nano-technology and the bio-sciences are not the standard in other core areas of the business realm.  To put it bluntly, we are often reliant upon antiquated means of processing information.  In the world of transactional document processing, we see major dependence on a combination of human intelligence  and physical data entry to convey document based data.

 

Data Entry’s 4 Big Issues

 

Accuracy

Information entry into critical back end, or front end systems that drive business processes forward, can often have error rates in excess of 3% in traditional scenarios, like Accounts Payable or Sales Order Processing, this can contribute to all kinds of problems, whether from over or under payment or incorrect order placement.  In extreme scenarios it can lead to much more harrowing scenarios like this one, entailing a rapid descent in altitude on a commercial flight, whose flight systems were dictated by user entry of the navigation and flightpath system.

 

 

Speed

Data entry is only as effective as the operator who is doing the entry.  Human resources have physical limitations and can’t scale to match the velocity at which sophisticated Optical Character recognition technology can capture and extract character data.  Ultimately, slower processing has a direct proportional impact on the cost to process said documents, which ties into the next point.

 

Cost

Data Entry is a costly proposition, especially if you operate in any first-world country.  The obvious solution to this equation has been the rise of outsourcing, though that has its own set of complexities to include linguistic barriers, infrastructure stability, time zone constraints, and cultural differences.  However, despite those factors, the off-shoring model for tasks like data entry have gained significant traction and become booming markets in countries like India, the Philippines, and even China.

 

Misinterpretation

Another complexity of data entry is misinterpretation of data from its source information.  This can often transpire as syntax errors, or simple transpositions in things like dynamic assignment of data field naming conventions based upon the subjective discretion of the individual operator, which can create all types of indexing and continued processing issues.  Such is the reasoning for the adage, garbage in, garbage out in terms of computer (and data) processing.

 

The Solution

 

Certainly there are advantages to capable data conversion technology like OCR, but it is a challenging technology to deploy in most scenarios because it is costly and requires intense technical management in an on-going capacity.  For these two reasons, many organizations that have looked at bringing this type of technology in because of the demonstrated benefits, have simultaneously shied away from committing to the necessary investment, because in most cases it is not justifiable.

 

To that end, the continued desire to improve operations, and interest in ways to boost productivity, and reduce processing costs, will result in more companies moving to document process outsourcing providers.  More than just a traditional business process outsourcing arrangement, many companies will want to gain the efficiencies afforded by advanced technology, but will want to retain critical control over their core processes.  In a sense it is a hybridization of the success of traditional BPO practices and the addition of both advanced technology and web-based, scalable software that enable companies that would otherwise not be able to obtain the technology and process improvements outside of the transactional arrangement.

 

The implications are far-reaching with  areas of opportunity to include Accounts Payable automation, Accounts Receivable remittance processing, Sales Order processing, and expense report receipt management.

Free eBook on Uncovering the 7 Costs To Process an Invoice eBook

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Topics: Accounts Payable Automation, Invoice Processing, ap automation, Data Entry

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