Jan 13, 2017 Chris Doxey
Cost reductions and efficiency gains are important indicators of success in the accounts payable department. But having perspective on which part of your AP workflow needs automation first is important before pulling the trigger.
So where do you begin?
With metrics of course!
Data-based decision making is how leading companies operate. It’s important to know which metrics are indicators of success or failure.
Here are 10 useful metrics to guide your decision whether it’s time to improve AP:
- Percentage of invoices paid by paper check
Over half of your invoices paid by check is a bad sign. This misses an opportunity to automate by switching to ACH or v-card. The wasted costs from postage fees, processing, and time spent chasing down lost checks puts a strain on your AP department and introduces the risk of check fraud.
- Percentage of low dollar invoices paid by check <$100.00
Issuing many small payments by paper check is a classic mistake many AP departments make. Checks aren’t ideal for processing small-dollar payments. Plus they aren’t as immediate as issue a card or ACH transaction plus checks cost significantly more to process, too.
- Number of manual invoice approvals
Manual payment approval workflows can be a disjointed and frustrating experience for AP. The process can stall for several days, or even weeks, when an approver is out of the office. Automation provides expediency through managing approvals by referencing an employee master file. This way, if an employee is promoted or assigned as a new approver, the workflow recognizes these changes, and adjusts accordingly.
- Percentage of suppliers using ACH electronic remittance
Want to know a secret? Most suppliers want ACH. Maybe they haven’t asked for alternatives to paper checks, but getting paid faster is a huge advantage. More working capital for suppliers means better investment opportunities. And for the payor, an opportunity to reduce waste and alleviate the burden of paper. That’s what we call a “win-win.”
- Percentage of recurring payments
“Set it and forget it,” is the standard for recurring payments. If you have them, they should be automated. There’s no reason to exert extra effort by initiating payment each and every month.
- Number of escheatment issues
Investigating uncashed supplier checks is a huge headache. Ongoing escheatment issues from checks that remain uncashed present unforeseen problems for AP to investigate. Considering partnering with payment automation providers that resolve these escheatment issues.
- Percentage of emergency or off-cycle checks issued
The fees for cutting last minute checks can have a compounding effect. When these kinds of scenarios arise, other payment types like virtual card works wonders for delivering money where it needs to go fast, without messing with dropping a paper check in the mail.
- Number of duplicate payments
Duplicate payments happen. However, they are much more avoidable than most AP staff realizes. AP automation tools have safeguards in place to check for matching invoices before a duplicate payment is ever issued. This is the difference between preventing problems and dealing with their consequences.
- Number of duplicate suppliers
Continuously validating supplier information verifies that no duplicate records exist for a vendor in the master vendor file. But doing this manually can present a huge time burden for AP staff and infringe on their commitment to other priorities. Partnering with a payments provider that offers compliance screening and supplier validation before money is sent helps with fraud preventionand data integrity.
- Number of internal control issues
Decreasing fraud instances by focusing on automation improvements will greatly reduce the number of control issues within your organization. Your organization stands to save money through both fraud prevention and expenses saved by tightening up your AP workflow.