SOLUTIONS: PROCURE-TO-PAY
According to a recent CIO magazine survey, corporate CIOs view business process improvement as their major objective in considering any new technology.
According to Invoice Automation Benchmarking Report 2010, paper isn’t going away. While the exact percentage of invoices received in a paper format differs based on several variables such as company size, number of vendors and industry, the number averages around 77%.
Reducing Cost to Process an Invoice
There is always the potential for labor savings. According to Payscale.com the median annual Accounts Payable Clerk salary is $37,900 with a range usually between $34,266-$42,419. The Accounts Payable Network stated that an efficient accounts payable clerk can process on average 27,000 invoices per year. Based on the efficiency and effectiveness of the A/P clerk that number can drop to just a few thousand. Errors in input and rework drastically affect efficiency and effectiveness.
Aberdeen Group Cost to Process an Invoice:
- Best-in-Class (Top 20%): $3.34 average cost to process an invoice
- Average (Middle 50%): $6.29 average cost to process an invoice
- Laggard (Bottom 30%):$16.67 average cost to process an invoice
For more in-depth info, choose your primary function below:
Reducing Errors
With a high volume of vendors and invoices, human error is inevitable. Studies report that the error rate in processing manual invoices is between 12% and 15%. The cost to locate a lost document can reach $120, and the cost to replace it, as much as $220. A survey of more than 400 A/P departments by The Institute of Management & Administration (IOMA) found that companies who utilized OCR for automated data capture were processing 25-60 percent more invoices with the same level of A/P staffing as those who were relying on manual data entry.
Aberdeen Group Time to Process an Invoice from Receipt through Approval for Payment:
- Best-in-Class (Top 20%): 4.1 days to process an invoice
- Average (Middle 50%): 6.1 days to process an invoice
- Laggard (Bottom 30%): 16.3 days to process an invoice
For more in-depth info, choose your primary function below:
Capturing Vendor Discounts
For most companies today, cash flow is the name of the game. To help keep cash flowing into their coffers more smoothly and predictably, many companies offer what are known as prompt-pay discounts — incentives to encourage customers to pay their invoices not just on time, but early.
Prompt-pay discounts are often referred to as “2/10, net 30” discounts. Translation: If the payment amount is due in the typical 30 days, you’d receive a 2% discount if you pay it in 10 days instead of 30.
A discount of 1% for paying 20 days early equates to an annual interest rate of approximately18%.
Aberdeen Group Discount Capture Rate:
- Best-in-Class (Top 20%): 90% early payment discount capture rate
- Average (Middle 50%): 47% early payment discount capture rate
- Laggard (Bottom 30%): 18% early payment discount capture rate
For more in-depth info, choose your primary function below: