Do you have a hunch that the cost of processing invoices is bleeding your bottom line by a thousand cuts? Or do you simply want to target and eliminate waste at all levels of your organization? Either way, accounts payable is often a key culprit where inefficient accounting processes are concerned. Utilizing a method centered around continuous improvement, and enabled by a smarter, automated finance and accounting platform, accounts payable efficiency can be a stepping stone to business growth.
Analyzing accounts payable
In many industries, processing invoices with speed and efficiency is of paramount importance to the business as a whole. Payments need to be accurate and timely to maintain vendor relationships, but going above the call of duty in accounts payable could also allow firms to realize savings through early payment discounts. Accounts payable is also now a common component of outsourced accounting operations. Still, CFOs are rightfully concerned whenever they feel invoices are moving too slowly or taking up too many resources.
“It’s now possible to realize growth thanks to intuitive outsourced accounting platforms.”
The American Productivity and Quality Center publishes regular reports on core business metrics like accounts payable efficiency, collecting data from across all industries as well as between firms of similar size or function. This data serves as a benchmark for CFOs to follow as they hunt for savings in their own companies.
According to the APQC’s most recent data on the cost of invoice processing, which included reports from 1,485 organizations, the median cost to process an invoice came out to $5.83. However, a wide disparity exists between the top and bottom quartiles of accounts payable cost. The top 25 percent of AP departments surveyed spent five times less than those in the bottom 25 percent – $2.07 per invoice for the former and $10 for the latter.
Leveraging growth from AP efficiency
CFOs and controllers might believe there’s some kind of secret to accounts payable efficiency that has missed them somehow. But Perry Wiggins of CFO.com warns that these industry-wide metrics don’t paint a complete picture. He points out that the top performers tend to cluster in sectors like distribution or consumer products, which tend to process more invoices than average.
“Many of them invested long ago in technology to automate accounts payable and accounts receivable, reducing the amount of labor required to keep the money flowing in and out,” Wiggins wrote. “Such industries often feature more mature process approaches, with more advanced use of collaboration and automation.”
This level of maturity is now available to firms in any industry thanks to new finance platforms that streamline outsourced accounting functions. Automated accounts payable systems have been in place for some time, but only recently have they been as accessible and versatile in a shared services setting. These developments put more power in the hands of CFOs to not only realize new efficiencies in their accounting processes, but also to capture and analyze data that will drive their businesses forward to even more productive insights.
If you’re looking to capitalize on continuous improvement in accounts payable or throughout your finance department, get in touch with Consero to learn more about what a powerful outsourced accounting platform can do to make it happen.