Business Improvement

Accounts Payable Productivity – Make Best Practice Common Practice

How Does Your Department Measure Up?

Keep the Cash Flowing
The effective management of working capital forms the cornerstone of any finance department in fact it lies at the heart of any organisation. This is where an effective Accounts Payable department can step in and make all the difference. A sluggish approach to oiling the wheels of corporate cash flow will result insupplier dissatisfaction and reduced profits. An efficient department at the peak of its abilities will have a steady cash flow satisfiedsuppliers and a happy MD. Ok so you know this already but what can be done if youre in the first category?

One good place to start is to take a look at the six key areas where a failure in functionality can have dire consequences to the company as a whole:

• Financial controls
• Error rates
• Automation improvements
• Process costs
• Duplicate payments
• Suppliersatisfaction
• Financial controls

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 a segregation of duties a rolebased security system including levels of authority and a system of best practice guidelines to work towards. All of which will lead to greater efficiencies and will bring relief to anxious compliance officers!

Error rates
Errors can be costly in many ways. Some may be disastrous without ever being apparent such as irreparable damage tosupplier 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 youre working for a billion company the units soon stack up. Best practice can drive the error rates down to less than 1. A thorough investigation of the MasterSupplier File and the implementation of effective 3 way matching techniques go a long way towards addressing this issue.

Automation Improvements
The key here is to find the appropriate tools for your organisation. Its easy to become bogged down in a plethora of different options all supplied by an everincreasing number of providers. The first thing to do is take a long cool look at your organisation and recognise the areas where there is room for improvement and where automation may actually add value. Once youve done this you will need to review the different products on the market. In some cases companies have discovered that productivity actually declined in the immediate aftermath of automation so it is a process which has to be undertaken carefully. However it has also been found that if used correctly tools such as imaging and workflow superior 3 way matching solutions used together with bolton products such as those which unearth duplicate payments can achieve savings of 70 of the cost of processing theirsupplier payments.

Processing Costs
The cost to process an invoice is the most basic of A/P metric and yet can often be the most difficult to assess given the wide disparity between one organisation and another. However it has been calculated that it costs between 2 and 10 to process asupplier 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. Obviously the adoption of a code of conduct within an A/P department and adherence to best practice advice will push your organisation towards the top performing bracket.

Duplicate Payments
This is an area which is impossible to defeat completely but duplicate payments dont have to remain unclaimed and simply accepted as a normal part of the A/P function. In addition an increase in duplicate payments can imply an organisation with a lack of appropriate controls in place. The purchase of bolt on technology to pinpoint overpayments can overcome these failings.

SupplierSatisfaction
Finally it doesnt matter how hard your Account Managers work or how often you use a suppliers services if you dont pay them on time or if there are consistent errors within your payments you can say goodbye to any long term working partnership. Best practice companies tracksupplier satisfaction in a variety of ways. An increasing number of organisations use Interactive Voice Response and web based selfservice portals to allowsuppliers to check payment status and to get answers to other questions. A solid working relationship withsuppliers makes sound business sense and can impact on many different areas of your organisations functions.

All in all the important thing to remember is dont be content to leave things the way they are tempting as that sometimes is. A shift in attitude and working practices is not merely paying lip service to the powers that be but can actually make a real difference to your working life and to your organisations profitability.

About the writer:  Passionate about providing readers with key information on accounts payable in Accounts Payable News. My background covers many different sectors including housing museums and finance. With experience in all areas of marketing editing and sales I aim to build and promote a not for profit site of practical use to Accounts Payable professionals

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