Posted by Steve Wilcox on Fri, Apr 24, 2009 @ 10:47 AM
Recently, Karen Kroll penned a very good article for BusinessFinance titled "How AP Got its Groove Back."
The gist of the article is that "with external funding tight and sales flat or declining at most firms, more corporate executives are looking internally to identify ways in which they can squeeze cash from operations -- or at least get a better handle on its flow. When you can't look to sales to replenish the corporate coffers, you need to be better stewards of the cash you've already brought in, says Thomas Bohn, executive director and chief executive officer with the International Accounts Payable Professionals (IAPP), an Orlando-based industry association."
Most of the article presents a very interesting case study for setting up a new AP Shared Services operation at Broadridge, a $1.6 billion solutions provider based in New York.
There are lots of great tidbits including the following:
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"At this point, leading firms are automating about 80 percent of their invoices, says Kurt Albertson, director of advisory services with The Hackett Group in Atlanta. This compares with about 20 percent for other firms."
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"an in-house finance and accounting shared services center can cut AP costs by 40-plus percent, but only if tools like imaging and workflow solutions are introduced ..."
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"As Broadridge's experience shows, technology is key to transforming and improving the accounts payable process ... While all potential technology investments are scrutinized these days, the benefits of systems that can streamline the AP process increasingly are recognized by the folks holding the purse strings. "Processing paper-based invoices is very inefficient," Jones says. "Enterprises can't afford that level of inefficiency today."
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"Moreover, most executives urgently need to enhance visibility into cash flow, and technology can provide that ... executives today are eyeing projects that let them know when cash is coming and going. "
There are a lot of other interesting points in the article including a list of AP Best Practices at the end that includes a quote from yours truly:
1. Keep it simple. Avoid processes "with multiple loopbacks, and re-thises and re-that's," as these add time, says Rakesh Shukla, co-founder of 170 Systems. Along these lines, you want a single technology platform, chart of accounts, vendor master file, and so on, he adds.
2. Eliminate paper. Processing, storing, and finding paper consumes time, space, and money, notes Evie Fletcher, accounts payable manager with RDO Equipment Co. in Fargo, North Dakota. Use electronic data transmissions and imaging and workflow solutions to cut paper use.
3. Use key performance indicators. Executives who want to improve the job their AP department is doing need to focus on key performance indicators (KPIs), says Duncan Jones, a London-based senior analyst with Forrester Research. Examples include the average time it takes to process an invoice and the number of invoices each AP employee handles.
4. Bring stakeholders together. Truly improving AP requires bringing together representatives from procurement, treasury, and the supply chain, as well as accounts payable, says Kurt Albertson, director with The Hackett Group. "You have to get the four groups working together."
-Rakesh Shukla
@rakesh170
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