Accounts Payable Metrics that Matter in 2020
The perceived value of accounts payable continues to rise as executives start to view their accounts payable operation as a strategic unit that will play a larger part in their organizations success. A new type of intelligence is enabling accounts-payable leaders to view their operations differently and make better-informed decisions with accurate and robust data to benchmark and gain better visibility into internal AP processes which can be game-changing for their department and teams.
In this new report, Ardent Partners presents important new research on the industry's best and most widely-used accounts payable benchmarks so executives can make better informed decisions for their organizations AP function.
Top Challenges Holding AP Back
At the surface, AP is destined for greater things, supported by the growing perception that the function adds real value to the enterprise at large. However, several sizeable barriers exist that hold AP back. In 2020, exceptions (62%) remain the bane of AP's existence slowing processing and creating bottlenecks that mute efficiency and effectiveness.
Two other longstanding pressures, lengthy invoice approval times (51%) and "too much paper" (40%) shows that, while AP has good momentum, many groups still struggle with traditional operating deficiencies. This means that no matter how far AP advances within the enterprise, including its overall perception, it must first overcome its traditional challenges before it can rise to higher ground.
Best-in-Class Accounts Payable
Ardent Partners defines Best-in-Class performance as the 20% of enterprises with the lowest average invoice processing costs, and the shortest average invoice cycle times. Top-performing enterprises have taken their AP operations to the next level by leveraging technology to streamline the AP process, make it more efficient, and enable more strategic activities to be carried out.
Invoice processing costs, as simple and fundamental as they may be, remain a major benchmark for AP performance because the metric reflects the level of efficiency present within the program. Ardent Partners' research has shown that Best-in-Class enterprises focus on core processes and leverage ePayables solutions at a very high rate which results in a nearly six-times lower cost to process an invoice.
Best-in-Class organizations also leverage the power of automation and efficiency to improve processes related to invoice receipt, approval workflow, and payment scheduling, which results in a three-times faster time to process a single invoice.
Summary
By definition, intelligence is the ability to acquire and apply knowledge and skills. Intelligence is also the actual knowledge that is used to understand actions, conditions and intentions, and to inform decision makers at the tactical (operational) level and the strategic (executive) level. Simply put, intelligence is vital to the execution of strategies, polices, and plans, whether one is an AP clerk, controller, or CFO. But what classifies as intelligence is also a moving target. As AP departments mature, the intelligence that has the most value changes. For example, an AP operation that is still manually keying invoice data finds great value in using systems to capture information digitally, while a Best-in-Class operation that has a high percentage of its invoices processed in a straight-through manner will benefit from an understanding of the business' cost of capital and visibility into short-term cash liquidity needs.
Accounts Payable leaders need to start thinking about intelligence in the context of their organization's current state of maturity and work to identify the areas that can be best leveraged. Over the next few years, Ardent Partners predicts that a new type of intelligence is going to enable AP teams to view their operations differently and, by doing so, it is going to force these same leaders to manage them differently. Accounts Payable's Age of Intelligence demands powerful analytics and deep insights. It demands agility. The ability to make better informed decisions across an organization can and will be game-changing. Accounts Payable leaders must start now to ready their teams.
by Bob Cohen and Matthew York at Ardent Partners
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