The Accounts Payable Automation Imperative — How to Blend People, Process and Technology
If Benjamin Franklin was correct when he said “A penny saved is a penny earned,” then you will earn a great deal for your organization by following the strategies and tactics in this solution paper. Almost every organization, from large corporation to small business, from public sector to nonprofit, has an imperative to save money on its operational processes, to do things less expensively, to accomplish more without increasing headcount, or (unfortunately), to keep up with the workload despite reductions in staff.
When economic times are good, companies have a tendency to get sloppy in their procedures, to let things pass, to throw more people at a dysfunctional system to mask the inefficiencies instead of attacking the underlying problems, thus proving the old maxim, "Rising revenue can cover many other sins." However, what was acceptable a few years ago is no longer acceptable today. And if you do institute the right policies and technologies to see you through the tough times, your organization will be that much stronger when a strong economy reappears.
If you need one more reason to care, then please read this often-reported statistic from the Gartner Group very carefully: a 5 percent reduction in operating costs has the same P&L impact as a 30 percent increase in sales. And while it is beyond the scope of this paper to show you how to get a five percent reduction in your overall operating costs, we can and will show you ways to reduce your invoice processing expenses by 50 percent or more.
As is true with many other areas of operational excellence, there are three legs to the stool of improving Accounts Payable Automation effectiveness: Processes, Technology and People.
Is it possible to use the right blend of processes, technology and people to cut costs, streamline processes and reduce risks in your invoice operations, all at the same time? The answer is yes, but only if you understand the metrics of AP automation, create a specific and measureable plan for streamlining your invoice processing, and implement that plan the right way. But for most of us, doing nothing is no longer an option, and the single most important thing you can do to get your program on track is to reduce the number of manual processes through automation. This is the Automation Imperative.
The Automation Imperative was described in a session at the 2009 Forrester Research IT Infrastructure and Operations Forum - Automating Process Execution for Agility and Efficiency: "Automation is the key to operational excellence because exploding complexity has rendered traditional methods ineffective. Automation is an evolutionary path that incorporates both technology and process. It is not an audacious, technological "big bang" for wholesale staff replacement."
Let's have a look at how the Automation Imperative can profoundly impact the costs of your accounts payable operation. Note that the cost per invoice ranges are compiled from averages from four excellent sources of information on the impact that automation has on the effectiveness of accounts payable/invoice processing operations, including:
While each of these organizations uses different methodology to measure the cost of invoice processing, they all agree there is a large gap between those organizations who are highly automated (best-in-class), moderately automated (average) and non-automated (laggards). Almost every study agrees that the best-in-class organizations process invoices for only one-fifth to one-half the cost of average companies and a staggering one-tenth the cost of laggard companies. This is what is meant by the Automation Imperative — it is a call for you to become efficient, to become effective, and to stop other organizations from gaining or sustaining a competitive advantage.
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