accounts payable: best-in-class strategies for reducing invoice processing costs and time (2010)
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© AberdeenGroup 2010
Accounts Payable: Best-in-Class Strategies for Reducing Invoice Processing Costs and Time
Christopher Dwyer Research Analyst, Aberdeen Group
Nasreen Quibria Senior Analyst, Aberdeen Group
Greg Collins Relationship Manager, Esker USA
© AberdeenGroup 2010 2
Agenda
Introduction and Research Background
Research Findings
Best-in-Class A/P Strategies and Performance
Recommendations for Action
© AberdeenGroup 2010 3
Speaker Introduction
Christopher Dwyer
Research Analyst, Aberdeen Group
Christopher Dwyer is a research analyst in Aberdeen's Global Supply Management practice. He has extensive writing, editing and research experience. He has contributed to and led research efforts focused on complex categories, such as contingent labor, print management, and T&E, as well as driven benchmark studies centered on the procure-to-pay process. In 2009, in addition to leading Aberdeen's contingent labor research, he has also co-led the Global Supply Management’s team coverage in the areas of accounts payable (e-payables) and spend analysis.
© AberdeenGroup 2010 4
Speaker Introduction
Nasreen Quibria
Senior Analyst, Aberdeen Group
Nasreen Quibria is a Senior Analyst at Aberdeen Group. Nasreen’s research spans the financial value chain, including topics from e-payables, treasury and payments, financial and operational risk management, to financial planning, budgeting, and forecasting, and working capital management. Before joining Aberdeen Group, she was Director of Payments at the Association for Financial Professionals (AFP). Nasreen has a track record of leading successful initiatives in financial services and technology industries. Nasreen was a key architect of the Federal Reserve Bank of Boston’s Emerging Payments Research Group (EPRG). Prior to the Fed, she was Director of Product Development and Management at Eliza Corporation where she played a pivotal role in transforming a start-up company to a profitable business. Nasreen holds a B.A. in economics from Wellesley College and an M.B.A. from Boston College.
© AberdeenGroup 2010 5
Aberdeen’s History of e-Payables Research
2010
2008
2006 Accounts Payable: Strategies for Success (December 2006)
Invoicing and Workflow (April 2010)
2009
2007
E-Payables: Accounts Payable Automation (March 2007)
E-Payables: Solution Selection Guide (September 2007)
E-Payables: Electronic Payments and Fraud Prevention (June 2008)
E-Payables: A/P Strategies for Success (September 2008)
E-Payables: Invoice Receipt and Workflow (May 2009)
E-Payables: A/P Rising (September 2009)
E-Payables: Electronic Payments (July 2009)
E-Payables: Invoice Receipt and Workflow (March 2008)
© AberdeenGroup 2010 6
o Aberdeen PACE Model Pressures
Actions
Capabilities
Enablers
o Strategies and Tactics
o KPIs – Usage and Specifics
o Follow-up Surveys
interviews
Aberdeen’s Research Methodology
© AberdeenGroup 2010 7
Agenda
Introduction and Research Background
Research Findings
Best-in-Class A/P Strategies and Performance
Recommendations for Action
© AberdeenGroup 2010 8
42%
35%
23% 14%
14%
20% 31%
21%
Survey Profile
General Manager / EVP / SVP / VP
Director Manager
Other Staff
C-Level Executive
Company Size Job Titles
Midsize ($50 million to
$1 billion
Large (over $1 billion)
Small (less than $50
million)
Survey of 152 companies worldwide
© AberdeenGroup 2010 9
Top Pressures Driving Companies to Focus on A/P
Source: AberdeenGroup
15%
23%
29%
43%
57%
Need to reduce risk of fraud / abuse
Difficulty managing archives of paper-based invoices
Need for better cash management
Corporate directive to lower invoice processing costs
Lack of visibility into invoices / A/P document
Lack of visibility is a top concern of businesses…
© AberdeenGroup 2010 10
The Visibility Factor
Source: AberdeenGroup
Over half of companies have limited to no visibility into A/P processes
5%
15%
32%
48%
No visibility
Real-time
Good visibility
Limited visibility
© AberdeenGroup 2010 11
27%
27%
29%
31%
62%
Conduct internal assessment of current A/P capabilities
Standardize IR&W processes
Centralize A/P processes
Integrate e-payables with other systems
Automate invoicing processes
Top Strategic Actions to Improve A/P
Source: AberdeenGroup
Companies are automating invoice processes
© AberdeenGroup 2010 12
Centralization of Core A/P Functions
Source: AberdeenGroup
30%
34%
35%
36%
45%
49%
79%
Receipt
Approval
Indexing
Scanning
PO Issuance
Reconciliation
Payment
Receipt and approval are the least centralized and biggest bottlenecks
© AberdeenGroup 2010 13
Impediments to A/P Improvement
Source: AberdeenGroup
21%
23%
33%
37%
39%
Securing executive support for A/P transformation
Lack of automation of exception / discrepancy handling
Non-standard nature / multiple formats of invoices
Difficulty with integrating A/P and other systems
Lack of internal support for change
© AberdeenGroup 2010 14
Agenda
Introduction and Research Background
Research Findings
Best-in-Class A/P Strategies and Performance
Recommendations for Action
© AberdeenGroup 2010 15
Maturity Class Definitions
Source: AberdeenGroup
Definition of Maturity Class
Mean Class Performance
Best-in-Class: Top 20%
of aggregate performance scorers
$4.84 cost to process a single invoice
3.7-day cycle time to process a single invoice
Industry Average: Middle 50% of aggregate
performance scorers
$18.27 cost to process a single invoice
14.2-day cycle time to process a single invoice
Laggard: Bottom 30% of aggregate
performance scorers
$25.83 cost to process a single invoice
41.3-day cycle time to process a single invoice
© AberdeenGroup 2010 16
29%
29%
40%
38%
40%
35%
46%
46%
48%
50%
50%
59%
Executive support for invoice receipt / workflow automation
Complete audit trails on demand
Enterprise-level visibility into A/P
Standardized invoice receipt / workflow processes
Quick retrieval of invoice images
Clear policies for invoice receipt-to-payment workflow
Best-in-Class All Others
Best-in-Class A/P Capabilities
Source: AberdeenGroup
© AberdeenGroup 2010 17
Best-in-Class Technology Utilization
Source: AberdeenGroup
15%
20%
14%
7%
23%
29%
24%
24%
30%
32%
42%
52%
Supplier networks
Digital signatures
Supplier portals
EIPP
Spend analysis
Automated invoice receipt / workflow system
Best-in-Class
All Others
© AberdeenGroup 2010 18
Business Case for A/P Automation
Definition of Maturity Class Best-in-Class All Others
Number of invoices processed per month 14,080 9,409
Value of invoices processed per month $67.8m $45.9m
Percent of invoices that are PO-based 63% 62%
Invoice processing cost (single) $4.84 $20.13
Annual invoice processing cost $817,644 $2,273,076
Annualized benefit of Best-in-Class performance
n/a $1,726,656
Payments receiving early payment discount 8.8% 6.0%
Annualized impact of 1% gain in early payment discount capture (at 2/10 net 30)
$164,795 $110,051
Source: AberdeenGroup
© AberdeenGroup 2010 19
Agenda
Introduction and Research Background
Research Findings
Best-in-Class A/P Strategies and Performance
Recommendations for Action
© AberdeenGroup 2010 20
Why Does A/P Automation Matter in 2010?
Source: AberdeenGroup
Visibility, visibility, visibility
Standardization of internal processes
Leads cost containment efforts
Link to other functional areas
Spend intelligence
© AberdeenGroup 2010 21
Recommendations for Action
Source: AberdeenGroup
Review current receipt and approval policies and identify major program gaps
© AberdeenGroup 2010 22
Recommendations for Action
Source: AberdeenGroup
Review current receipt and approval policies and identify major program gaps
Look to automation as a means of not only improving A/P processes, but also catapulting this function to a strategic level
© AberdeenGroup 2010 23
Recommendations for Action
Source: AberdeenGroup
Review current receipt and approval policies and identify major program gaps
Look to automation as a means of not only improving A/P processes, but also catapulting this function to a strategic level
Close the loop with data integration
© AberdeenGroup 2010 24
Recommendations for Action
Source: AberdeenGroup
Review current receipt and approval policies and identify major program gaps
Look to automation as a means of not only improving A/P processes, but also catapulting this function to a strategic level
Close the loop with data integration
Utilize the A/P function to drive spend visibility
© AberdeenGroup 2010 25
Order to Cash and Procure to Pay market leader
22 years of field experience, 240 employees
More than 2.5 million users
3,000+ SaaS customers world wide
80,000+ document management servers installed world wide
Over 3 billion pages processed each year
25% of Esker’s employees are dedicated to product development
Esker is a recognized leader in helping organizations eliminate paper
and improve business processes with on premise and on demand
document automation solutions. Specializing in the Cash Conversion
Cycle, Esker helps organizations automate sales orders, accounts
receivables, purchasing, and accounts payable from end to end driving
productivity, efficiencies, and profits.
Esker Awards and Accolades
Esker Highlights
2005 Codie Awards Finalist for “Best Document
Management Product or Service”
Included in “Cool Vendors in
Knowledge Support,” by Gartner.
Patented received for Esker DeliveryWare Rules Engine
They Quit Paper & Software
They Quit Paper
“Esker does the best job at linking capture with DOM. It considers capture
as important as creation and delivery and brings these together to address
pain points in sales order processing and invoice management.”
© AberdeenGroup 2010 26
Why SaaS Makes Sense for AP 1. Capital vs. Operational
AP is a “non-revenue generating function”
Lowers up-front investments (brings Enterprise solutions to SMB)
Ability to execute an automation initiative with minimal IT support
2. Decentralized / Distributed Processes
Scan and enter invoices remotely
Expand approval workflow to all company locations
Securely
With audit trail
No additional ERP licenses required
3. Control & Visibility
Overcoming the Catch 22
Additional headcount
BPO – business process outsourcing
© AberdeenGroup 2010 27
Stages of AP Automation
Package A: Paper based - Invoice archiving and indexing
Package B: Imaging Enabled - OCR functionality
Package C: Touch-less AP - Payment approval workflow
© AberdeenGroup 2010 28
Thank You!
Steve Smith Vice President of Sales Americas Tel 608-828-6110 Fax 608-828-0100 steve.smith@esker.com
Greg Collins
Sales Manager, Americas
Esker, Inc. § 1212 Deming Way § Suite 350 § Madison, WI 53717
Tel § 608.828.6000
Fax § 608.828.1000
info@esker.com
For more information on Accounts Payable Automation,
please visit http://www.apondemand.com
OR Call us at 1-800-368-5283
© AberdeenGroup 2010 29
Q&A and Contact Info
For More Research Please Visit:
www.aberdeen.com
Christopher Dwyer, Research Analyst
Global Supply Management, AberdeenGroup
chris.dwyer@aberdeen.com
617.854.5280
Nasreen Quibria, Senior Analyst
Financial Management and GRC, AberdeenGroup
nasreen.quibria@aberdeen.com
617.854.5379
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