Deploying predictive models for Accounts Payable can help leaders plan for their organizations’ future with faster and better business decisions.
It is no secret that organizations with high levels of Accounts Payable (AP) automation spend less than half the time and energy processing invoices than their non-automated counterparts. But that is not all.
Top performers do much more with automation to ensure their success—they future proof their Accounts Payable organization using some very specific strategies and tactics. The best part is, their secrets to success are not rocket science and can be implemented by any company.
In their recent checklist for developing a future-proof AP organization, The Hackett Group’s team outlined six key strategies companies are using to save big in the automation era. Some of the work they recommend surrounds the Accounts Payable process itself such as centralizing invoice receipts and getting serious about digitizing data across the organization. However, the other concepts recommended actually dive deeper into methods for optimizing internal resources and carefully balancing in-house vs outsourced resources.
One of the top recommendations is that high-performing companies make significantly better use of information and analytics to gain visibility and strategic insights that drive their performance. According to the group, winning organizations take notice of all the data they collect (often from multiple forms and various locations), sparing no opportunity to crunch the numbers and create scorecards, KPIs and other metrics as an output.
Analytics can drive AP performance
At the most basic level, companies initially focus on reviewing cost-per-invoice-processed and time spent processing each invoice. Taking this data to new levels may include measuring all aspects of the invoice extraction process to track timing of each area and to identify bottleneck areas, then reporting this data on visual dashboards suitable for management.
Using this data to tweak various aspects of the invoicing process can kick savings up to a new level.
Beyond the basics, smart companies may deploy predictive models to help AP leaders analyze and strategically plan for the organization’s future so they can drive better business decisions, investments and growth over the long term.
Some examples of more advanced analytics capabilities that characterize top performing Accounts Payable organizations may include:
- Implementing supplier master data standards
This alone can reduce supplier setup costs by half (from $US12 down to US$5 per supplier), especially if this information is centralized and controlled. Having a supplier portal where suppliers self-service and can be onboarded with ease also contributes to performance.
- Standardizing global supplier payment terms
This included offering early payment discounts that are applied through the supply base segmentation.
- Ensuring compliance
This is achieved by documenting and communicating policies and procedures, then following-through with suppliers to ensure procedures are followed.
- Creating simple real-time dashboards
These visual tools show process performance so that leaders and others can see at a glance where the organization is winning or failing.
The power in analytics comes from providing AP organizations with on-the-fly access to information that helps them spend less time battling cost center fires and more time transforming their department from being merely a tactical operation into a true driver of strategic business value.