5 Signs That Your Payables Group Is Running Late To The Digital Economy

Chris Rauen

Managing accounts payable transactions at the speed of the Internet offers advantages today that span many dimensions. You can compress your invoice processing cycle time, lower invoice processing costs, virtually eliminate invoice errors, and better manage cash and working capital, to name a few.

In a digital economy, business performance Businessman at modern officefrom a payables perspective can be measured by how effectively you interact with your suppliers. This requires a shift in focus, from manual processing to networked payables. A key enabler is the business network, which allows you to connect and collaborate with suppliers in ways that go far beyond what you can achieve with paper payables.

Are you on the fast track to networked payables?  Here are the five signs that your accounts payable group may be falling behind.

1. Your business network is designed for processing invoices only.

That ignores the opportunity to improve processing of other key documents such as purchase orders, order confirmations, advance ship notices, and payment remittance.  The better option is to align with a business network that handles a broad set of transaction documents, not just the invoice.

2. Double-digit invoice exception rates.

Invoices with errors and exceptions are the most costly invoices to process. Ballpark estimates range from 2X to 10X the cost of a clean invoice. Focusing AP staff on exception management leaves little time for driving suppliers to a networked payables process, where validation rules in the network can handle invoice exceptions for you. A networked payable process that helps suppliers submit clean invoices frees up more time in AP for high-value tasks, such as working with procurement to enforce compliance and identifying early payment discount opportunities.

3. Lengthy invoice processing cycle.

Research data shows that poor performers can take weeks to approve a paper invoice. When the process includes mailing an invoice to a remote location before it gets to accounts payable, that cycle time can be longer, and increase the chances of lost invoices and processing duplicates.

4 Your procurement and accounts payable organizations aren’t on speaking terms.

Processing an invoice isn’t an isolated activity, but part of a larger procure-to-pay (or source-to-settle) process. The ability to link invoices to purchase orders, contracts, and service entry sheets, and enable suppliers to invoice against these key transaction documents, deliver new processing potential that can dramatically impact business performance. To make this happen, you need a close working relationship between procurement and AP.

5. Your go-to commerce tools remain a fax machine, telephone, and mail delivery.

Low productivity and higher costs are the two most obvious limitations from these tools, but even larger problems result from poor management of cash and working capital, and difficulties with matching invoices to purchase orders or contracts.

This story originally appeared on SAP Business Trends.

Is simplification part of your business’s long-term strategy? See Business Simplification in Leadership.

Chris Rauen

About Chris Rauen

In his role at SAP Ariba, Chris Rauen educates procurement, finance, and shared services professionals on the business value of accounts payable automation, procure-to-pay transformation, and collaboration via business networks. Chris has addressed these topics at finance and shared services conferences, in articles for trade and business publications, and in blogs for online communities. Chris has more than 15 years of experience in e-payables, and holds a B.A. in Economics from the University of California, Santa Barbara.