• AP invoice automation
  • Best practice

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Do you know how your AP process is really doing?

How is your AP invoice process doing? Do you see symptoms of mysterious diseases but can’t get a diagnosis? Maybe you have a feeling that it’s all right but are not sure how to find out for sure?

Doctor’s advice: read this blog post for hands-on tips on how to do a simple health check of your current AP invoice process.

1. Select the KPI’s that are relevant for your business

No one knows your business needs and goals better than you, so make sure that you identify the key performance indicators (KPIs) that make sense for your situation. There are some obvious metrics to keep track of, so keep reading for a solid foundation from which you can launch your improvement initiative.

If you are matching invoices against some sort of supporting document, such as a purchase order, contract or goods receipt, it makes sense to monitor these KPIs:

  • Automation level – the percentage of your invoices that pass through a fully automated and touchless process.
  • Manual connection level – the percentage of your invoices that cannot be automatically matched to orders, thereby causing manual intervention.
  • Total lead time – the number of days it takes for an invoice to be processed, from import into the AP system to posting in the ERP.
  • Lead time waiting for manual approval – the number of days you are waiting for those invoices that need some kind of manual handling.
When you’re dealing with non-PO invoices there are slightly different metrics to monitor:
  • Automated distribution level – the percentage of your invoices that are automatically distributed to the correct approver within the organization by the AP automation solution.
  • Total lead time – the number of days it takes for an invoice to be processed, from import into the AP system to posting in the ERP.
  • Lead time waiting for approval – the number of days you are waiting for your colleagues to approve their invoices.

2. Compare your performance against industry peers

Now that you’ve got some KPIs to monitor you’ll need to find a way to measure your performance on a regular basis. Talk to your AP automation solution provider about setting up reports and dashboards so that you have full visibility into your process efficiency performance.

So how do you know if your performance is good, average or really poor? The trick is to compare it to industry benchmarks and organizations with situations similar to your own. Check out our webinar Benchmark your AP invoice processing efficiency for real life benchmarks for a number of different KPIs. During the webinar we share the results of our average and top performing clients so that you can see how you stack up against your peers.

3. Identify areas for improvement

Now that you know where in the AP process you perform sub-par, you should be able to identify which suppliers are causing the majority of deviations, which are causing manual work in your AP department and for your approvers, and which approvers are taking too long to approve invoices. When the source of the problem has been pinpointed, you need to define an action plan for how to address your poor performance. The plan needs to be clear and detailed so that executing the plan is straightforward.

4. Monitor KPIs on a regular basis

It’s important to understand that a health check of your AP invoice process is not like doing a yearly checkup at the doctor’s office. And there is not one medicine to fix a problem once and for all. Optimizing your AP invoice process is a long-term commitment focusing on continuous improvements. You will need to measure your KPIs regularly - preferably on a quarterly basis – to be able to catch bottlenecks or issues in the process. Then, take action on those issues, test and measure again.

You are operating in a dynamic environment with new suppliers entering the process frequently. This further emphasizes the need to think of process performance improvement as a process rather than a project. In other words, continuous improvement, with the emphasis being on continuous.

So how do you know when to stop improving? This is where benchmarking is key. As long as you are performing less than average on key KPIs you need to improve. If you’re already in the best-in-class group, then your focus should be elsewhere. Watch our webinar Benchmark your AP invoice processing efficiency to hear me further explore this very exciting topic!

Daniel Saraste

Director of Products

daniel.saraste@medius-group.com

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