ardent partners’ accounts payable metrics that matter in 2019 · epayables framework – receipt,...

2© Ardent Partners Ltd. 2019

Ardent Partners’ ePayables Metrics that Matter in 2019

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REPORT SPONSORSHIPThe views and opinions in this report represent those of Ardent Partners at the time of publication. Sponsoring companies have had no measurable influence on the content and research in this report. The contents of this research report are the exclusive property of Ardent Partners. Please direct any comments or questions regarding our research sponsorship policy to Ardent’s Chief Research Officer, Andrew Bartolini, at [email protected] and/or 617.752.1620.

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PRGX Company Description

PRGX Global, Inc. is a global leader in Recovery Audit and Spend Analytics services. With over 1,600 employees, the Company serves clients in more than 30 countries and provides its services to 75% of the top 20 global retailers and over 25% of the top 50 companies in the Fortune 500. PRGX delivers more than $1 billion in cash flow improvement for its clients each year. The creator of the recovery audit industry more than 40 years ago, PRGX continues to innovate through technology and expanded service offerings in the S2P cycle. In addition to Recovery Audit, the Company provides Contract Compliance, Spend Analytics and Supplier Information Management services to improve clients’ financial performance and manage risk.

Contact info: [email protected] 888-799-7976

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Over the past decade, Ardent Partners has conducted more ePayables market research studies than any other firm or consultancy in the industry. In that time, Ardent has benchmarked thousands of distinct organizations across all phases of the ePayables framework – Receipt, Process, and Pay. Ardent Partners’ ePayables Metrics that Matter in 2019 is a compilation of the industry’s best and most widely-used accounts payable benchmarks captured in Ardent’s most recent state of the market report: The State of ePayables 2018: The Future of AP is Now.

About This Report




In 2019, the perception of AP is on the rise. The long-held view of AP is finally changing for the better. Executives have started to realize the potential of AP as a strategic unit that is key to the larger organization. This is hopefully a sign of things to come, and bodes well for the general future of AP and how it fit into the modern, digitized business world. In fact, 52% of organizations perceive the AP function as either “very” or “exceptionally” valuable to organizational operations.

AP’s Perceived Value

Say AP is Exceptionally or Very Valuable52%




AP’s Key to Success (People)The opportunity to transform and modernize the AP organization is significant and achievable and should be undertaken sooner rather than later. To accomplish this, most AP departments will need to find a business catalyst (like improving P2P operations or a drive for efficiency) and either an executive sponsor or strong functional partner like procurement to successfully initiate the process.

Executive Support for Total AP Transformation

Enhanced Collaboration with Key Stakeholders

38%

37%




Percent of Invoices Received ElectronicallyThere is a direct correlation between the percentage of invoices received electronically and the cost and time to process an invoice. The percent of invoices received is still woefully low. It is time to eliminate paper invoices.

MANUALELECTRONIC45% 55%




Electronic Payments on the RiseWhile invoicing remains more manual than electronic, recent developments and innovations combined with an increased recognition of the emerging business value of ePayments have led enterprises to look at new ways to drive financial value. New ePayment solutions and processes have made it strikingly more economical and efficient to pay suppliers electronically.

MANUAL

B2B PAYMENTS MADE ELECTRONICALLY59% 41%

$11.57




The Cost to Process a Single InvoiceThe average cost to process a single invoice (all-inclusive, including labor, overhead, technology, etc.) decreased by only 4% in the last year. This suggests that the day-to-day operations that support invoice processing still have a way to go to achieve optimal performance




The Time to Process a Single InvoiceAccounts Payable teams have made headway in how fast invoices are processed. The time to process an invoice is down almost 25% year-over-year. While there is still room to speed up the process further, this improvement indicates that AP teams understand how important it is to quickly get invoices approved and scheduled for payment.

8.6DAYS




Suppliers that Submit Invoices ElectronicallyOnly a quarter of suppliers are currently submitting invoices electronically. This translates to AP departments still being overwhelmed by the influx of paper.

24.7% 75.3%




Invoices Processed ‘Straight Through’Processing invoices in a straight-through manner without human intervention is a hallmark of the next-generation AP function. Truly “smart” AP groups are able to break free from the constraints, inefficiencies, and high cost of manual processing. High volumes of straight-through processed invoices help define top performance today and are a primary result of a successful AP transformation.

26.6%

26.6%




PO-Based Invoices60.5%

Invoices Linked to a Purchase Order (PO)Invoices associated with Purchase Orders achieve higher automated match rates, process faster with fewer exceptions, and cost far less than invoices without the correlating documentation. A higher percentage of POs typically enables higher straight-through processing rates.

23.2%




Invoice Exception RateInvoice exceptions remain a major problem and have been increasing over the last few years. This past year saw an increase of nearly 26% over the previous year. Accounts Payable staffers spend an inordinate amount of time correcting and managing invoice exceptions, which significantly increases the cost and time to process invoices.

EXCEPTIONS




Top Challenges Plaguing AP: Exceptions & Approval TimesProblems continue to plague AP with invoice exceptions (41%) and lengthy approval times (39%) being the most commonly reported challenges. Exceptions create severe bottlenecks in the overall AP process while long approval times result in lost opportunities. Both issues can greatly diminish overall productivity and inhibit AP staff from attacking more strategic activities.

Invoices and Payment Approvals Take Too Long

Invoice Exceptions

39% 41%




Top Challenges Plaguing AP: AP Staff Time Spent Handling ExceptionsNearly one-quarter of the average AP department’s staff time is spent working directly with suppliers to fix invoice, processing, and payment errors. For AP to move into its next phase of evolution, its staff cannot spend this inordinate amount of time tracking down phone numbers, correcting erroneous contact information, and interacting with suppliers to lock down missing pieces of information and fix mistakes.

Amount of AP Staff Time Spent Handling Exceptions24%




Lack of AP and Procurement CollaborationThe foundation of a successful P2P project is built within and across the procurement and accounts payable functions of an enterprise. Tight alignment between these two groups must exist for a P2P program to grow and thrive. Collaboration is the key to success. Procure-to-Pay teams that fail to work together absolutely diminish the value of the work of the other. Nearly one-third of all enterprises are dealing with this problem in 2019.

Have no Linkage Between AP and

Procurement

32%




Contested Supplier PaymentsSimilar to straight-though processing with invoices, payment processing should also be measured by how many exceptions or inquiries AP has from suppliers after payment is made. One would expect this number to be extremely low as an invoice has already been vetted through the approval process prior to a payment being executed. However, more than 1 in 10 payments made to suppliers are contested. This amounts to a great deal of time and effort spent correcting problems one would not necessarily expect to exist.

of all B2B Payments are

Contested

12%




Early-Payment Discounts CapturedWhile the use of ePayments is on the rise, enterprises are only capturing a small percentage of discounts offered to them by suppliers in return for early payment. Increasing the number of discounts captured remains a big opportunity for AP to take advantage of and positively impact working capital.

of Early Pay Discounts Captured19%




The Importance of InformationFor AP to thrive in a dynamically evolving world, it must serve a greater purpose than the relative sum of its parts. Transforming invoice and payment data into influential spend management and vendor payment intelligence will secure AP a place in the future state of business operations. Through deeper analytics, seamless integration between core spend management and financial management systems (i.e. ERP, P2P, etc.), and the ability to transform day-to-day data into real intelligence, AP will become a part of this new age.

State Data and Intelligence are IMPORTANT or CRITICAL Pieces of AP80%




Deeper, More Agile Analytics and Reporting56%

’Smarter’ Systems67%

AP Game ChangersWhat’s necessary for AP’s Success? Nearly 70% of all enterprises believe that ‘smarter’ systems are the key to driving more efficiencies. A majority (56%) of AP teams also believe that the availability of better, deeper, and more insightful information that can be provided by improved analytic and reporting tools is a game-changer.




For all the talk about digitization, technology, and the next generation of accounts payable, most AP professionals still face daily manual tasks that drain the time and energy of the team. The current utilization of technology varies greatly. A higher prevalence of point solutions that address the receipt and processing of invoices is most common. Far less common are full P2P solutions, business and payment networks, and self-service supplier portals.

AP Technology Adoption

Document Scanning

72%

eInvoicing Solution

44%

Automated Data

Capture

31%

Self-Service Supplier

Portal

28%

Dynamic Discounting

16%

Automated Approval

55%

ePayments Solution

41%

Complete P2P

Solution

30%Business Network

27%SCF

Solution

9%




The role of AP is changing, and staffers are beginning to get involved in much more than invoice processing and bill payment. Most AP departments are now involved with fraud prevention, while more and more are directly involved in automation and digital transformation initiatives.

AP’s Expansion of Duties in 2019

Supplier Relationship Management

40%

Improving Payment Operations/Platforms

50%

Spend Management

44%Fraud

Prevention

87%

SCF/Working Capital

Optimization

47%P2P

Technology

60%

AP’s Expansion

of Duties in 2019




Lower Invoice Processing Costs5X

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 five-times lower cost to process an invoice.

‘Best in Class’ – Invoice-Processing Costs




Best-in-Class organizations leverage the power of automation and efficiency to improve processes related to invoice receipt, approval workflow, and payment scheduling. Their ability to master the art of tactical financial operations results in a 2.5 times faster time to process a single invoice.

‘Best in Class’ – Invoice-Processing Time

Faster Invoice Processing Time2.5X




Invoice exceptions are the bane of most AP teams and negatively impact their operational efficiency. Best-in-Class organizations are aware of their implications and have taken steps to mitigate their impact. The result has been a 50% lower invoice exception rate than other enterprises.

‘Best in Class’ – Invoice Exception Rates

Lower Invoice Exception Rate50%




Invoices that avoid human intervention speed through the receipt, approval, and payment processes enabling organizations to improve efficiencies, lower costs, and open opportunities to impact working capital management. Best-in-Class enterprises have leveraged technology and automated manual processes with amazing results – they have a 2.4x higher rate of ‘touchless’ invoices.

‘Best in Class’ – Touchless Processing

More Touchless Processing2.4X




Accounts Payable sits in the middle of an enterprise’s financial activity and is ideally situated to identify and flag potential instances of invoice and/or vendor payment fraud. Accounts Payable is also positioned to be a perfect ally for compliance and risk management teams, and can assist in enforcing policies, identifying potential red flags, and escalating issues internally.

An Eye on Fraud and ComplianceCO

MPL

IANCE

of AP Teams Manage/Support Fraud Prevention and Compliance Activities87%

Expectation is a 3x increase in RPA usage

Expectation is a 15x increase in AI usage




Artificial Intelligence (“AI”) and Robotic Process Automation (“RPA”) offer an extraordinary opportunity to drive the AP industry forward in new and exciting ways. With that in mind, AP teams are developing plans to leverage these technologies at a rapid pace over the next 24 months.

Artificial Intelligence and RPA Taking Off




Accounts Payable plays a critical role in the future of enterprises. Enabling organizational success will require improved collaboration, automation, and the acceptance of innovations and changes to how things have been done in the past.

What Will AP Look Like in Two Years?

YEARS FROM NOW

Innovation Ready Culture53%

Full Automation59%

Functional Collaboration with Other Departments71% 2




Predicting what AP will look like five years from now can be challenging but not impossible. Expect to see a continued and strengthened alignment with enterprise goals, the use of cryptocurrencies beginning to take hold, as well as AP developing into the ‘go to’ place for spend management information.

What Will AP Look Like in Five Years?

YEARS FROM NOW

AP as an ‘Intelligence Hub’ for Spend, Finance, and Cash Insights28%

Cryptocurrency Adoption31%

Improved Enterprise Experience

44% 5




SummaryThe emergence of innovative technologies in recent years has the potential to radically alter the way business is done. As enterprises intensify their focus on optimizing internal processes, modern accounts payable teams are now better positioned to advance beyond their transactional past and showcase their strategic value. New technologies are entering the marketplace at a pace never before seen. Today, AP teams, which used to only provide their primary value based on increasing efficiencies, are now well-positioned to help expand their impact and transform into a more strategic function. These leading AP teams must now strive to become strategic partners that can showcase their importance and make an impact at the highest level of business operations.

For most AP teams, smart investments in AP automation (or “ePayables”) will be critical to their success. To do this successfully, it will be important for AP and finance leaders to keep an eye towards the future and be aware of the latest innovations in the market. Emerging technologies like Blockchain, Machine Learning, and AI are helping to make a strategic future for AP departments possible and have great potential to impact the AP industry in the years ahead. The Future of AP is Now. Accounts Payable’s largest opportunities for business impact and value creation still exist in the future. But, whether an AP team slowly moves forward with minor progressions or triggers a major “spark” of innovation and intelligence, what is most certain is that failure to pursue action and improvement now will be a death-knell. Accounts Payable leaders must invigorate their organizations with a newfound sense of purpose and push for AP to become a flexible, “smart” hub of knowledge and insights.

As AP continues to find its place in the digital enterprise and transform itself into an on-demand center of financial intelligence, AP groups must work to push themselves beyond the legacy models and approaches of the past. The AP leaders that develop the ability to consistently leverage innovative technologies and ideas will enjoy a significant competitive advantage and start to truly challenge the conventional wisdom of what is possible for AP.




Demographics

About the Authors

The research in this eBook is drawn from respondents representing the following demographics:

Job Function: 66% accounts payable; 19% finance/treasury; 14% procurement/supply chain; 1% other

Job Role: 20% VP-level or higher; 28% director-level; 39% manager-level; 13% staff-level

Company Revenue: 58% Large (revenue > $1 billion); 24% Mid-market (revenue between $250 million and $1 billion); 18% Small (revenue < $250 million)

Region: 74% North America; 24% EMEA; 2% Asia-Pacific

Industry: More than 29 distinct industries are represented. Public Sector, Health Care, Financial Services, Education, and Manufacturing are the largest industries in the survey pool; no industry represents more than 15% of the overall survey respondents.

Andrew Bartolini is the Founder and Chief Research Officer at Ardent Partners. With 20 years in the industry and 10 years leading the charge at Ardent, Andrew is a globally-recognized expert in sourcing, procurement, accounts payable, and supply management. Andrew focuses his research and efforts on helping procurement and

finance teams get the most from their technology investments and develop strategies to achieve Best-in-Class performance. Andrew is

also the publisher of CPO Rising, the first independent site written for and about Chief Procurement Officers and other supply management executives (www.cporising.com).

Andrew has been named a “Pro to Know” by Supply and Demand Chain Executive multiple times and holds a B.A. in Economics from The College of the Holy Cross and an M.B.A in Finance from Indiana University. Follow Andrew on Twitter @andrewbartolini and Ardent Partners @ardentpartners.

Bob Cohen is a Research Director at Ardent Partners. A seasoned professional with more than 15 years of experience helping enterprises transform their Procure-to-Pay operations, Bob is the leading analyst in the ePayables space. Prior to joining Ardent, Bob spent 12 years working as a Vice President at Basware, where he helped

establish the firm’s U.S. presence as a major player in the AP automation space. In his career, Bob has helped hundreds of AP and P2P teams achieve Best-in-Class performance via their use of ePayables, P2P, and Business Network solutions. Cohen has also worked at American Express where he helped the commercial card giant better align its products and services with a continually evolving market.

Bob leads Ardent’s ePayables research practice and regularly publishes insights and articles on Payables Place (www.payablesplace.com), Ardent’s site focused on AP Innovation and Automation. Bob holds a B.A. in Marketing from Bryant University and an M.B.A in Finance from The University of Connecticut.

http://cporising.com/

http://cporising.com/

https://twitter.com/andrewbartolini

https://twitter.com/ardentpartners

http://www.payablesplace.com/




Ardent Partners : Research with Results

Ardent Partners is a research and advisory firm focused on defining, and advancing the supply management strategies, processes, and technologies that drive business value and accelerate organizational transformation within the enterprise. Ardent Partners was founded in 2010 by Andrew Bartolini.

Ardent Partners actively covers the supply management marketplace and produces research to help business decision-makers understand (1) industry best practices and how to improve performance & (2) the technology landscape and how to identify the best-fit solution(s) for their specific budget and requirements.

Contact [email protected] if you have any questions about this report or our research in general.

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