Editor’s Note: Today’s article is a sneak peek into the findings from Ardent Partners’ latest AP research report, “ePayables 2016: Eyes on Prize,” available for download here. Throughout June and July, CPO Rising will feature several articles highlighting key discussion points from the new report.
The accounts payable (“AP”) team is now positioned to evolve beyond its historical status as a back-office unit and become a true strategic business partner that can drive value beyond the tactical. This transformation begins with functional process improvements, which also set the stage for future enhancements and are often the foundation AP can build upon to reach the “next level” of performance (and become a hub of deep financial intelligence). Process strength throughout the three phases of what Ardent Partners calls the “ePayables Framework”—Receive, Process, and Pay—lays the proper groundwork for the next stage in AP’s evolution, including automation of key attributes and changing the perception of accounts payable.
The three phases of the ePayables Framework are potentially all strong candidates for refinement. In deciding which area to focus on first, it is important to understand that alterations in one phase can have a direct impact on the others. Because of this interconnected nature, every sub-process within the ePayables Framework must eventually be enhanced. In the year ahead, AP teams have emphasized the following areas for process improvement:
- Invoice receipt: This phase of the ePayables Framework covers how the enterprise receives invoices from suppliers. AP automation initiatives have historically focused on invoice receipt with the goal of reducing the inbound paper invoice. The low percentage of enterprises focusing on this process area, 16%, is indicative of the fact that many enterprises have alleviated the problem of paper entering the AP workflow—often through baseline document management or scan-and-capture solutions. Modifications in this phase can reduce costs through eliminating the need for data entry of paper invoices and putting invoice data in a usable electronic form more quickly.
- Invoice processing: This phase of the ePayables Framework refers to how the enterprise processes its invoices once the data is in a usable form. This is the main focus of organizations surveyed for Ardent Partners’ ePayables 2016: Eyes on the Prize report (click here to download). The high percentage of businesses (39%) focused on invoice processing makes sense because, while many may have a solution or service that addresses the inbound paper invoice, the AP team often must still process the invoice through a manual workflow. Improvements in this phase of the ePayables Framework can result in enormous cost and process savings as well as open up opportunities to generate significant financial value in the payment phase.
- B2B payments: The payments phase of the ePayables Framework, which details how invoices are paid, has only recently garnered significant attention from AP and finance leaders. However, Ardent Partners expects the level of interest in this process area to grow from its current level of 18%—especially because enhancing the payment process can drive significant financial returns. More electronic payment solutions have entered the market in recent years, which has resulted in increased awareness of the opportunity the payment process presents for AP to drive true strategic and financial value. This category includes payment automation, dynamic discounting, and supply chain finance (“SCF”), which can provide financial benefits that reverberate far beyond the AP team.
Although the vast majority of enterprises emphasize one phase of the ePayables Framework over the others, 26% see value in addressing the entirety of the framework as a coherent whole. This is understandable given the interconnected nature of the AP process, and the organizations that focus on all phases have built a business plan to address each portion sequentially.
Process improvement is an important facet of AP’s long-term success, as well as its doorway to the “next level” of performance. Without a strong, interconnected AP process, where each phase runs efficiently, there is little chance that the function will evolve beyond its transactional past. Whether AP decides to propose separate business plans for each phase, or build a plan that focuses on all of them sequentially, the fact remains that each piece of the ePayables Framework must eventually be enhanced if AP wishes to become a strategic business partner.
Download the ePayables 2016: Eyes on the Prize report today (click here) for more about the state of the AP marketplace and how the function can improve in the years to come.