3 essential indicators in Accounts Payable Management

Accounts Payable Indicators

A recent "Metric of the Month" from CFO.com shows us the damage that late payments can cause in the relationship between buyer and seller.  

CFO.com regularly publishes an article "Metric of the Month" based on benchmarking surveys of the APQC (American Productivity and Quality Center). In July, CFO.com presented a survey that measured the performance of the accounts payable process.  The results reinforce arguments in favor of outsourcing the entire invoicing process from receipt to accounting, eliminating errors, delays and eroding relations with suppliers, which may result from reliance on paper and manual processes.

The survey compares high, average and low yields in companies in different indicators. Here are some statistics:

Indicators High Average Low
Time (in days) required to solve an error in the invoice 3 5 7
% of invoices inputted manually 42% 58% 77.3%

It is disappointing that even companies with best performance still type 42% of their invoices into the system, even though that number has been decreasing year after year.

But what is really significant is the following statistics:

Indicators High Average Low
Total cost of AP as percentage of income 0.04% 0.08% 0.16%

Although AP takes the weight of dissatisfied supplier when payment is delayed or exceptions occur, the article notes that most of these errors and exceptions occur in the integration of procurement processes with Accounts Payable. The problems may be due to the lack of standardization, mismatching between the invoice number and Purchase Order number, or simply too many exceptions that require special attention and therefore slow down the payment process. That said, as we have already indicated, it is the AP department who deals the complaints from suppliers resulting from these issues, and who conducts the investigations and the necessary phone calls.

By outsourcing the entire process of provider invoices, companies eliminate the errors inherent in the manual processing of provider invoices. Even when no errors occur, outsourcing accelerates the invoice approval process, eliminates inefficiencies and reduces processing and payment costs. A correct configuration of the services standardizes all the documentation, automatically matches the invoice with the Purchase Order and, when necessary, with the receipt of goods, and sends the invoice directly to the ERP system for payment. Exceptions are drastically reduced and therefore can be resolved quickly, to the great satisfaction of both buyer and seller

The evolution of technology and the deepening specialization of some of the companies dedicated to the outsourcing of the AP process have made the availability of affordable and competitive services for businesses of all sizes a reality. Each company must assess their needs and objectives and decide whether outsourcing is worthwhile. If parameters such as productivity, flexibility, quality and profitability are your goals, then the answer is clear.


See how AP process outsourcing can streamline the process of your supplier invoices.

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