• Processing costs
• Automation improvements
• Error rates
• Duplicate payments
• Financial controls
• Supplier satisfaction

Processing Costs

The cost to process an invoice is the most basic of AP metrics.  It has been calculated that it costs between £2 and £25* to process a supplier invoice & payment.  Interestingly there seems to be little correlation between the size of the company and the cost per invoice.  In top performing organisations the average time it takes to process an invoice is 3 days – which compares to 6 days in an averagely performing company.  Research shows one of the major differences is having effective invoice processing & payment policies that are up to date, enforced and communicated to the team. Mistakes and managing credit notes often cost an organisation in excess of £10 per transaction*

The 6 steps you need to follow which will have immediate impact on your team and processing costs are:

• Identify key processing issues
• Revise, create and tighten key processing policies
• Create a processing policy guide
• Appoint a policy team leader
• Train all new staff according to guide
• Monitor and enforce policies

Automation Improvements

Any best practise AP department is constantly in the process of  finding the most appropriate AP tools to improve efficiencies. Good product evaluation should include the following steps:

• Investigate and recognise the areas where there is room for improvement
• Determine whether automation will add value. 
• Review the different products on the market through a trusted site
• Obtain free trial or evaluation
• Purchase only when payback within 3 months

It has also been found that if used correctly, tools such as imaging, OCR and workflow, superior 3-way matching solutions, used in conjunction with good audit control software, such as those which unearth duplicate payments, processing errors, and compliance issues can achieve savings of 70% on the cost of processing their supplier payments.

Error rates

Errors can be costly in many ways – such as increased internal costs and sometimes irreparable damage to supplier relationships.  The most obvious costs are in real terms ie loss of working capital and in wasted staff time.  On average around 4% of invoices contain errors.  A figure which may seem low at first – but if you process over 20,000 supplier invoices per annum – the costs soon stack up.  Best practice AP can drive the error rates down to less than 1%. A thorough cleansing of the Master Supplier File carried on a regular basis and the implementation of effective 3-way matching techniques, go a long way towards addressing this issue. Click here to see how you can improve your Master Supplier File

Duplicate Payments

This is an area which is impossible to defeat completely, but having a multi-layered strategy for prevention can help significantly. Most AP teams rely on a simple dupe checker integrated within their Accounting system and a few AP controls to stop duplicates and errors. Remember an error inputting an invoice could be a future duplicate. With AP doing more with fewer resources, this strategy is not comprehensive enough. There are over 30 reasons why dupes and errors occur and most organisations that process in excess of 20,000 invoices per annum need additional AP audit control software to check for these. Using this type of software should easily fit into everyday processes and can help save costs significantly, reduce errors & fraud and enforce compliance.  Click here for more on Duplicate Payment management

Financial controls

This is one area which is set to become heavily regulated in the future.  Whilst this brings with it burdens of responsibility and a decrease in an ability to be reactive – it does mean that employees have prescribed working practices to adhere to which inevitably reduces the margin for error. 

Controls should include:

• Segregation of duties,
• A role-based security system (including levels of authority)
• Best practice guidelines to work towards

Supplier Satisfaction

If you don’t pay your suppliers on time, or if there are consistent errors with your payments – you can say goodbye to any long term working partnership.  Best practice companies track supplier satisfaction in a variety of ways. 

• Interactive Voice Response
• Web based self-service portals to check payment status and general enquiries

A solid working relationship with suppliers makes sound business sense and can impact on many different areas of your organisation’s functions.

* From Accounts Payable News ®