Mark Innes, Coupa’s APJ SVP, shares global benchmarks to help businesses set realistic goals, and 5 steps to take when digitising accounts payable.
The path to digitising your invoicing systems and processes begins with purchasing. Shifting away from manual PO processes will improve your ability to track the flow from purchases to invoices and save your team time they could spend on other high-value tasks.
According to the latest benchmark report, the top performing companies are processing at least 99% of approved POs electronically with their suppliers, which shows they are well on the way to digitising their financial systems.
While purchasing is already primarily digital at these companies, invoicing still has some room to improve. There are three invoicing KPIs to help track this; electronic versus manual processing, approval times and the first-time match rate.
Top companies worldwide have at least 80.1 % of their invoices processed through electronic means with a high use of automation. Aside from speeding things up, coupling electronic invoicing with automation also helps them catch out-of-compliance invoices, streamline dispute management and reduce paper usage.
Processing paper-based invoices can take days or even weeks and is harder for teams to track where invoices are at throughout the process. The benefits of electronic invoices are clear, with the average approval cycle for invoices at top companies sitting at just 11 business hours and getting faster with each passing year.
With faster approvals, your company can avoid late payments or penalties and make it easier for others to do business with you. Your finance teams could benefit from early payment discounts and take less time to close the books.
The final KPI for efficient invoicing is the first-time match rate, or the number of invoices that are correctly matched with POs and receiving documents without the need for exception handling. Ideally this is not just two-way matching, ie. matching the data on the Invoice to the correct PO, but three-way matching of the invoice, PO and sales receipt.
For greatest efficiency, this process should be suitably automated to deliver a high match rate. Higher match rates mean fewer invoices to check manually and can indicate that your compliance policies are effective. Top global companies have set a benchmark of 87.4% for a first-time match rate.
While every organisation is at different stages of digitising their business processes, understanding where the top companies sit can help to set realistic goals at your own company. Building a technology business case around measurable benchmarks can help gain support from management and other teams and ensure solutions cover the aspects they need.
5 Steps to transform accounts payable
Here are five steps to help get you started with automation and transforming your accounts payable function:
- Identify the problem areas – Look for manual processes and challenges between and within purchasing, invoicing, payments and your ERP system. Also, consider the processes and challenges between your employees, suppliers and banks.
- Set informed improvement goals – Develop measurable KPIs using your internal data and market data, including the BSM Benchmark Report from Coupa. These help you set reasonable goals, chart your progress and let you know what it takes to be a top company.
- Modernise your AP processes – Once you’ve identified the problems and set goals for improvement, you can design new AP processes that deliver business impact. Try to eliminate paper. Consider pre-approved spending. Look for quick wins but be wary of quick fixes. Explore new ways to pay vendors and manage your cash.
- Communicate the value to stakeholders – The value you can gain from new AP processes and systems depends on suppliers, approvers, IT and AP teams, finance leaders, employees and executives actually using them. The more you can show these stakeholders how they can unlock value that’s meaningful for them, the more they’ll support the transition away from manual processing.
- Focus on rapid deployment and results – To encourage buy in and adoption, stick to a strategic rollout of intuitive processes that deliver quick wins and obvious value on which you can build.
By following the steps above and comparing your company’s performance against global benchmarks in business spend management practices, you can better chart the next steps your company has to take on its digital journey. Electronic purchasing and invoicing, coupled with automation, are critical parts of an overall transformation that can deliver significant value to the business.
If you’re part way through or about to digitise your purchase order (PO) and invoicing systems, then the 2022 Business Spend Management (BSM) Benchmark Report from Coupa may help you track your company’s metrics against how top companies are performing.
The benchmark report provides 20 community-powered KPIs for best-in-class performance across seven critical categories of spend management including invoicing. It’s based on a global analysis of almost $4 trillion in anonymised transactions conducted on the Coupa platform by 2500+ organisations and more than 8 million suppliers. The benchmarks throughout the report represent the median value for the top 25% of companies and give businesses an indication of how their own performance measures up.
The financial benefits of switching to e-invoicing and automation should be top of mind. If you need a refresh, we suggest starting with this earlier article about why it’s critical in the current business climate.
