Posted by Jarrod Levitan on Tue, Aug 03, 2010
Recently a discussion was started in LinkedIn about tracking AP performance and what metrics are used to make process improvements. There were some very interesting comments from AP professionals from around the world. Here are some of the ideas shared.
Popular measures;
• Cost per Invoice. This is calculated by taking the time and cost that goes into processing each invoices divided the total number of invoices processed. The cost should take into account all the AP FTE time, which is obvious, but should also include the all labour time that goes into processing the invoice including all management time on the approvals, and error fixing, duplicates, searching, handling and vendor enquiries etc. The labour portion adds up to around 60-70% of the total cost. The rest is desk costs as well as storage, courier and related costs. The average for a manual process is around $15-$20 per invoice. The electric al=automated process can be south of $5.
• Number of Invoices processed per FTE. This is productivity measure. To calculate you’re simply looking at the number of AP FTE’s per the monthly amount of invoices processed. You’ll find the average is between 750 – 1250 depending on the nature of the industry and complexity of the process. Automation can push you upwards of 5,000 per FTE.
When driving efficiencies into the process, whether it’s manual, automated, or mixture of both, you need to drill much deeper. This is equivalent to a production line in a manufacturing process, where you’re analysing each minute detail to drive quality and controls into the process.
Higher focussed measures;
• Speed to process an invoice in days.
• Late payment and penalty percentages as well as exceptions.
• The percentage of early pay discounts available and the percentage that are taken.
• Tracking error rates. Both payment errors and data entry errors. Goes without saying accuracy is an important part of the process.
• Tracking payment types. This is used to ensure that the most cost effective payment type is used.
• Total dollar amount of payment runs (EFT vs manual) as well as Foreign payments made.
• If AP automation and eInvoicing were in place, tracking the volumes of electronic invoices and electronic payments and set a deliberate plan in place to increase those volumes every year and quarter.
• Aging of invoices, from date received to paid. From invoice date to paid (we could analyze the vendors that send in invoices late and improve processing).
• Discounts achieved and discounts lost.
• Days waiting for Approval
• Date of receipt of invoice (manual or electronic) to date of entry.
• How many PO invoices, how many non PO invoices.
For those with high volumes, who are well automated and paying electronically, can use these to further enhance your process;
• First Time Pass percentage (%) in invoice processing.
• Analysis by Hold Code for the invoices that fail at First Pass. This gives insight into the hold reasons which are creating re-work. One can apply Pareto (80:20) rule to and tackle the major ones.
• Compare number of FTE's deployed on tasks other than processing activity. Ideal ratio is 1:2
• Review of debit balances (mainly aged ones) in various Supplier Id's. It is very important to keep an eye on this area as any major aged balances will attract audit comments as well.
One of the participants had this meaningful contribution “All AP metrics should be based on process exceptions that are actionable, meaning weekly/monthly meetings with those responsible for the root causes of the exceptions. The put through metrics are mostly worthless… if you aren't improving the process, you aren't managing the process!”
I turn to a famous quote or dictum “If you can't measure it, you can't manager it”. How many of you are managing and measuring your AP performance? What metrics are you using?
I have posted a link to the LinkedIn discussion at the bottom of the page for reference purposes where you can find all the contributors comments. Group: Account Payable Professionals. http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&discussionID=25327807&gid=128842&commentID=20261936&trk=view_disc
You can also find useful information regarding metrics from: http://www.ioma.com, http://www.iappnet.org, http://www.tawpi.org, http://www.aberdeen.com, http://paystreamadvisors.com.
Posted by Catherine Dahl on Thu, Jul 22, 2010
Has this happened to you or someone you know? Of course if you aren’t an accountant you might not see the humour in there! But then you would also not be reading this either!
Anyway, this kind of thing is more common than you might think. Paper causes problems; they can get lost, burnt, wet, ripped – you name it - paper is easily destructible. And we people make mistakes. So is there a system and a way to reduce that human touch and error? YES! AP Automation is here, and solves much of these issues. And to obvious those embarrassing situations, e-pay is here to help. It all starts with electronic purchase orders.
In the “olden days”, companies had to hand write PO’s in triplicate, send off copies to accounting, the supplier and the receiver. Then the product came in and was received and that information had to be send to accounting with another piece of paper and so on a and so on. In fact this system could cost anywhere from $31 per PO to $88 depending on the organizations size (source The Supplier Enablement Benchmark Report - AberdeenGroup KPIs & Metrics Mar, 2006). Even the “best-in-class” spend $28 to produce and process a PO. So once you had spend $50 ordering the item you then spend between $30 and $60 paying for it, in processing costs of manual AP and printed cheque payment. Invoices arrived, were stamped, routed for signature and coding (some never left the supervisors desk!) and manually entered into the accounting software for payment. Then a check is cut and mailed out, if there were no errors made along the way. The average company takes 10 to 25 days to get through this process and is spending far too much on the process.
Stay tuned for more fun demonstrations of AP hazards, there are so many! And think about automation, the paperless, painless way to make the computer work for you for a change!
Posted by Jarrod Levitan on Tue, Jul 13, 2010
This has been a long requested feature that's finally here. Now in Beanbills you can tell who did what and when in regards to any transaction. Like AP cost allocation changes, user changes or the status changes, including what was changed. Tracking changes to your payables workflow should be simple, and we kept it that way, so the interface is a basic report where you can filter by user, date and transaction. Example, show me all Jim's transactions for last week. Or show me all events that happened to this invoice through its process from day one.
It's very challenging to stop someone from doing something bad. You never suspect someone in your organization usually until it's too late. Unless you have some premonition about what they're doing. The audit trail provides that information dynamically. Obviously if the horrible event happens where an employee has done something bad, or simply gone beyond company policy, the evidence is there in black and white to prove what happened. I can see your auditors now having a party in the backroom. And for those controllers out there, although you may not admit it, you're dancing and have a drink with them.
We plan to extend the audit trail feature as Beanbills evolves. Help us improve it. Any and all feedback are super welcome.
Posted by Jarrod Levitan on Fri, Jun 25, 2010
Life just got so much easier for anyone who has to deal with ap invoices. Now in Beanbills, you can simple stand at your scanner, load up your invoice, push scan, and bright and early the next day you'll have the invoice image electronically with all its verified data. Ready to push along its workflow.
Even better, give your suppliers a Beanbills email address, and they can email directly into Beanbills, no more scanning!! No more data entry!!
What has been standing in the way of the paperless future is not technology, because that's available. But all the technologies that have to communicate to make it possible. Using email, which everyone knows and trusts, is robust and common, and the simplest way to make getting invoice information into electronic usable data. Without any disruption to the way we work and using the same technologies.
Start getting your suppliers to email their invoices to you. Email bill presentment is a happening trend. It's an obvious time saver for everyone, especially the supplier/vendor. No more printing, wasting paper, stuffing envelopes, mail costs... it's an expensive operation.
One more benefit. Every Beanbills user has an email capture address. You can stand at the copy machine and scan-email an invoice, or forward them if they came via email, to Dave in AP's address. Bang, the next day they're in his Intray all electronic and ready to deal with.
Posted by Jarrod Levitan on Mon, Feb 02, 2009
How many fake bills does your company process through payables? How many of those actually get paid? You would naturally assume none to the first question and be horrified if one actually got paid. Well that's what happened to thousands of companies to the tune of $7M.
Read this story, it's an eye opener.
Payables that slip through the cracks cost companies thousands every year. Whether it's fake, fraud, lost opportunities, or over payments, having a payables process or system that catches these items makes tons of sense and pays for itself in no time.