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The State of Automationin Accounts Payable

A Special Report fromThe Accounts Payable Network

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The State of Automationin Accounts Payable

A Special Report from The Accounts Payable Network

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121 Free Street • Portland, ME 04101207-842-5557 • FAX: 203-516-2396

www.TheAccountsPayableNetwork.com

© 2014 Diversified Business Communications

Published by Diversified Business Communications, Portland, Maine.

All rights reserved. No part of this publication may be used or reproduced in any manner or stored in any form whatsoever without written permission of the publisher. For information, contact Diversified Business Communications, 121 Free Street, Portland, ME 04101, 207-842-5557, www.divcom.com.

© 2014 Diversified Business Communications 3

Table of Contents

The Accounts Payable Network Advisory Board ............................. 4

Introduction ............................................................................. 5

A Closer Look at AP Automation Today ......................................... 6

Larger Organizations Report More Automation ............................ 11

Key Areas of Automation Focus ................................................ 12

Benchmarking – The Driver of More Automation? ........................ 15

Future Focus .......................................................................... 17

About The Accounts Payable Network ........................................ 20

About Esker ........................................................................... 21


The Accounts Payable Network Advisory Board

Steve Adams, CPADirector of Global Shared Services Implementations, McKinsey

Vivian Baker, APMAccounts Payable Director, Financial Shared Services, The Coca-Cola Company

Judy Bicking, APMFormer Global Director, Accounts Payable European Project, Johnson & JohnsonAP Best Practice Consultant and owner of Island Decor & More / Ship to Shore Home Decor

Debbie Vander BogartSenior Director, Finance General Manager, Shared Service Center, Levi Strauss & Company

Larry Brang, CPA, APMDirector, Commercial Services - Americas, Merck & Company, Inc.

Dennis Cooper, MBAVice President, Operations Director, Accounts Payable at PNC Bank

Lynda FoertschbeckExecutive Vice President, IRSCompliance, Inc.

David W. HayConsultant, Former Director, Shared Services, Hewlett-Packard Company

Lex LannomManaging Director, Global Disbursements, FedEx Services, FedEx Corporation

Frederick C. Litow, CTP, APM Head of Financial Administration, ING

Thomas F. NicholsPresident, Process Management Improvement, Inc. and former director of financial operations for AT&T’s corporate accounts payable and payroll management

Pamela Russavage, APMFinance Manager, ConAgra Foods Business Services Center

Ben ShaferDirector - Payment Services, Pacific Gas and Electric Company

Susan Tinkler-MullerSenior Director, Accounting Services, MTV Networks


Introduction

Automation – for years now the move from paper-based to electronic processes has been promoted as the Holy Grail in Accounts Payable — and for good some reasons. Automating the AP process holds considerable promise, including the often-mentioned benefits of significantly reducing paper invoices, improving productivity and saving money through new efficiencies. Beyond that, automation can also deliver unprece-dented visibility into your organization’s processes and finances, allowing for improved workflow, enhanced cash flow management and more strategic spend analysis.

So everyone is doing it right? Well…not everyone. Or, put another way, at many organizations automation has not yet matured to the point that it is delivering the sig-nificant, measurable benefits experienced by companies that have already evolved to highly automated AP processes. The question remains as to if, and when, AP automa-tion will reach the long-anticipated “tipping point” in which widespread adoption of automated practices will become standard operating procedure at organizations both large and small.

This report will provide a deeper, more detailed exploration into the current state of AP automation at organizations of every size, and across a wide range of industries. It will also take account of emerging trends to get a sense of where AP automation may be headed.

Wherever your organization may be on the automation journey, getting a clear snapshot of what your peers are doing, best practices, key challenges, and new opportunities can serve as vital information to see how you stack up. More importantly, the information can help you build a better business case for further investment in automated solutions.


A Closer Look at AP Automation Today

The recent AP Department Benchmarks and Analysis Survey conducted by the Insti-tute of Finance and Management (IOFM) offers a comprehensive — often eye-opening — look at where AP automation stands, as well as highlighting the best practices for automation success. The study is based on a 2013 AP Benchmarking Survey that drew responses from approximately 200 AP professionals throughout the United States. Respondents represented organizations of all sizes, from smaller businesses with annual revenues under $5 million and only one or two AP staffers, to corporate giants with more than $5 billion in revenues and fully-staffed AP departments. For perspec-tive, 38.1% of respondents were from organizations with between $200 million and $5 billion in revenue, while 35.5 % came from companies with between $10 million and $200 million. Just 7.7 % had more than $5 billion in revenue and 10% were under $5 million.

Figure 1: Respondents by Company Annual Revenue

The survey also drew responses across a range of industries, including manufacturing, financial services, retail, transportation, communications, media, utilities, health care, government, professional services, education and nonprofits. The most responses come from manufacturing (22%) followed by health care (12.1%). Financial services, professional services (legal and accounting), and education each represented 10.4% of respondents.


For the purposes of its survey, IOFM broke automation down into three categories:

High: Defined as significant use of imaging and/or electronic invoicing, automated workflow, near paperless T&E, ACH payments, use of p-cards, and possibly some invoice data extraction and other capabilities.

Medium: Defined as some use of technologies listed in the “high” category, but still reliant on a good deal of manual, paper-based processing operation.

Low: Defined as a mostly manual, paper-based processing operation with limited automation technologies in place.

Figure 2: Level of Automation

When looking at level of automation by individual industry, manufacturing topped the list of most advanced automation with 26.3% of respondents reporting high auto-mation. The financial service sector and retail sectors tied for a close second, with both reporting high levels of automation at 23.5%. At the other end of the spectrum, none of the institutional education respondents surveyed reported operating with a high level of AP automation and only 10% in the nonprofit sector reported high-level automaton.


For companies that are heavily invested in automation, the survey also validates many of the well-publicized benefits of optimizing their AP processes. Among the most com-pelling findings:

• Average number of PO invoices processed per month: The productivity of an AP staffer nearly doubles from processing 2,259 to 4,512 PO invoices per month when AP moves from a low to high level of automation. Yet the gains were not as dramatic when looking at all respondents with varying levels of automation. In that case, the average number of PO invoices pro-cessed per month by an AP staffer grew slightly to 2,728, from 2,462 in a 2010 survey. The median increased to 1,025 from 1,000 during the same time period.

Figure 3: Average Number of PO Invoices Per Month Per Staffer


• Average number of vendor payments that go out containing errors: Overall, the rate of payments containing errors is 2.4 percent. With a high level of automation it drops to 1.7 percent.

Figure 4: Average Number of Vendor Payments that go out Containing Errors

• Days to process a vendor payment: In 2013 it took an average of five days and a median time of four days to process an invoice. That compares favor-ably to the 2010 survey when respondents reported it taking 7.6 days on average and a median time of five days to process an invoice.

Figure 5: Average and Median Days to Process Vendor Payments


Yet despite clearly measurable results and the steady drumbeat advocating the move away from paper and antiquated processes, automation is by no means a slam-dunk at many organizations. In fact, in some respects, widespread adoption of automation re-mains stuck in neutral. Case in point: the researchers found that AP automation bench-marking — a key aspect of achieving sustainable automation gains — actually declined since the last survey was conducted in 2010. Specifically, the percentage of AP manag-ers who reported benchmarking their operations came in at 44.3% compared to 51% reporting benchmarking in the 2010 survey.

Figure 6: Use of Benchmarking in AP Overall

Perhaps an even more telling statistic that underscores the unrealized potential of auto-mation was this: All respondents, regardless of size and level of automation, reported that 71.2% of outgoing payments are still made by paper check, down just slightly from 75 percent of payments being made by check in the 2010 survey. The authors of the benchmark study write: “The fact that the paper check is still king is not surprising, as U.S. organizations simply have not been embracing electronic payments as fast as orga-nizations in other countries. This is unfortunate, because paper checks are expensive to produce and process and they are susceptible to tampering.”


Larger Organizations Report More Automation

So just how pervasive is automation in U.S. organizations? Well, to some extent, it depends how you define it. Nearly every AP department has implemented what can be considered some aspect of automation. Yet, when it comes to more integrated or full-blown automation that is capable of achieving the many cost-savings, efficiency and strategic results touted by experts, advocates and vendors, the picture is more complicated.

As previously mentioned, the survey broke automation down into three categories, high, medium and low.

If you place your organization in the low to medium categories, you have plenty of company. Nearly half of respondents (48.5%) identified themselves as being at a me-dium level and 28.7% of respondents self-identified as having low automation. Just 22.8% reported high levels of automation.

So who are the heavy adopters of automation? Not surprisingly, the larger the organiza-tion, the more likely that the AP department is automated. For example, 60% of respon-dents reporting between $1 billion and $5 billion in revenue identify their departments as highly automated; as do 58.3% of respondents whose annual revenue tops $5 billion. On the other end of the spectrum, generally the smaller the organization, the less likeli-hood there was of high level of automation in place.


Key Areas of Automation Focus

For organizations that are automating regardless of level, several types of processes and technologies are most commonly being utilized or are at the top of the AP wish list moving forward. Of particular focus is electronic invoicing as well as imaging & work-flow. These automated processes often go hand-in-hand. In fact, of survey respondents who report currently using e-invoicing, 84% also employ imaging & workflow technol-ogy. “Many organizations have determined that a mix of these technologies is the best solution to leaving manual processes behind,” survey authors wrote.

Electronic Invoicing

The implementation of electronic invoicing offers one of the most compelling benefits of AP automation from an efficiency and cost-savings perspective. The survey authors identify e-invoicing as “one of the fastest ways to move your AP department from a paper-intensive manual operation to a highly automated operation that finds itself with far less paper and even less manual data entry.”

Yet while many organizations are striving to achieve straight-through processing effi-ciency of e-invoicing, adoption can be challenging based on the need for vendor par-ticipation to gain the full benefits of the technology. Often, the initial strategy focuses on gaining participation from a handful of top vendors, which can deliver measurable results from cost and efficiency perspective.

The survey found that of respondents who identify as having high levels of automa-tion, nearly three-quarters are using e-invoicing. Overall, 39.1% of total respondents reported they are currently using e-invoicing while an additional 33.5% say they are planning to implement e-invoicing in the future. Again, the largest organizations are the greatest users of e-invoicing, while the smallest organizations of 99 employees or fewer are the least likely to have the technology. The key barriers to adoption reported by the smallest organizations were uncertainty about the many solutions from which to choose


as well as the lack of knowledgeable and readily available IT resources to help navigate the e-invoicing marketplace.

Figure 7: Use of Electronic Invoicing Overall

Invoice Imaging and Automated Workflow

Invoice imaging and automation of workflow is a significant focus of AP professionals across the full spectrum of organization size, industry and current automation level.

The process of scanning paper invoices and converting them to a digital format has widespread adoption among organizations that are automating AP. In fact, it is hands-down the most prevalent automation technology currently being used by survey respon-dents. A full 61.4 percent of respondents are using imaging & workflow now, and an additional 25.9% plan to use it moving forward.

While larger organizations are more likely to be using or planning to use imaging & workflow technology, many mid-sized organizations are also using or planning to use the technology. And imaging has broader adoption than many other AP automation


technologies, with 42.9% of the smallest AP departments — even some with only one staffer — reporting the use of imaging now.

Part of the appeal is that it stops paper “at the door,” capturing and converting it to electronic format. Even highly automated shops have some incoming paper, and less automated shops have reams. It is also an easier set of technologies to implement and manage in that it does not require vendor participation and can be an internally focused solution. Imaging and automated workflow also finds application in other processes across the company, including procurement, order processing and accounts receivable, enhancing the appeal of the investment to management.

Also driving increased imaging usage is the low-cost availability of multi-function devices that can easily turn documents into PDF format, as well as the growth of tech-nology being delivered via cloud-based solutions that can also readily perform the workflow function. In AP departments that are highly automated, imaging & workflow is nearly universal with 95% of respondents reporting using the technology.

Figure 8: Use of Scanning/Imaging Overall


Benchmarking – the Driver of More Automation?

The path to better and more integrated automation may well be paved by consistent benchmarking — gathering metrics and data that track the effectiveness of automation efforts while also providing insights for further enhancements and investment. Indeed, it seems clear the mantra “what gets measured gets done” is relevant when it comes to automation.

Specifically, benchmarking helps track enhanced efficiency, cost savings, and continu-ous improvement. These measures are useful in validating the value of automation, getting executive buy-in and perhaps most importantly, providing the data and informa-tion that can justify further investment in the automation process. Nearly half of all AP departments report that they benchmark, according to survey results. Yet there is considerable disparity in regard to benchmarking, with larger organizations dispropor-tionately engaging in the practice. For instance, at organizations with more than $5 bil-lion in revenue — the rate in which benchmarking has become standard practice jumps to 87.5%.

Clearly, benchmarking is a results-driven best practice that enhances efficiencies and cost savings. Consider that those AP departments that identify themselves as highly automated benchmark at a 90.5% rate. And organizations of all sizes that commit to benchmarking reap the benefits — the survey found that there are AP departments with as few as two employees that are effectively using benchmarking practices.

Companies in the low to medium range of automation face a chicken-and-egg dilemma when it comes to benchmarking. Because they have lower degrees of automation, ef-fective benchmarking can be more challenging due to a lack of relevant metrics, and perhaps, less expertise in effectively collecting and analyzing key metrics. Yet with-out benchmarking data, it is more challenging to build a data-driven business case for further investment, which would in turn likely increase both benchmarking and automa-


tion capabilities. The key in this scenario is likely to make benchmarking an integrated part of the broader automation strategy in a way that benchmarking capabilities grow organically as automation increases.

It is interesting to note that while less than half of survey respondents use benchmark-ing, 61% do report using metrics as a tool to manage the AP department. Also, slightly more than a quarter of respondents in two-person departments and 64% of those with three to five AP staffers are also using metrics to measure performance and results. As sound metrics are the foundation for successful benchmarking, it appears that many AP departments are well positioned to develop and employ more benchmarking moving forward.

Figure 9: Use of Metrics in AP by Company Annual Revenue


Future Focus

No doubt, at even the most automated of AP departments there is significant room to continue striving toward more advanced automation of many aspects of the AP process, as well the opportunity for more sophisticated benchmarking to both track results and drive deeper investment.

The demand for automation progress is certainly there from within the profession. When asked what would most enhance the productivity of their AP department as a whole, increased automation was far and away the top response. Of all respondents, 40.4% stated increased automation would lead to the biggest productivity gains, followed by 15.8% indicating more staff and additional staff training would move the needle forward.

Figure 10: Management Time: Single Greatest Productivity Enhancer


So what does the future hold for automation? And are we approaching a tipping point for across-the-board implementation of automated processes for AP? The survey doesn’t provide definitive answers. Yet one clear indicator of where AP automation may be heading is the considerable interest in the use of cloud-based solutions. That interest comes from AP professionals working across the diverse spectrum of organizations in terms of size and industry. It appears there is a shared belief that cloud-based solutions offer significant automation potential at just about any organization.

As the benchmark study’s authors put it: “The most striking thing we see when we look at cloud computing by organization size is that cloud-based solutions for e-invoicing, automated T&E and vendor portals are of interest across the size spectrum. The deliv-ery method appears to be recognized as a good fit for these types of technologies by many of our respondents.”

Yet while interest is high and there is plenty of hype around cloud computing, the sur-vey results show that cloud computing “has not yet made huge inroads into our respon-dents’ organizations,” with the most significant current use being for automated T&E.

As they plan for the future, some of the smaller organizations surveyed appear to con-sider cloud-based solutions an affordable option to further integrate automation into their systems. The survey found that 30.8% of organizations with revenue between $5 million and $10 million are using or planning on using a cloud-based accounting/finan-cial system. Meanwhile, 12.5 percent of the smallest organizations with revenue under $5 million are planning on using cloud-based e-invoicing and imaging systems.


Figure 11: Use of Cloud-Based Applications

Taken as a whole, the current state of automation offers a glass half-empty or half-full scenario. From the half-empty perspective it appears that at many organizations au-tomation has not experienced rapid acceleration or there are persistent challenges to getting any significant traction at all. Yet from a half-full view, it’s equally apparent that automation has taken hold at organizations both large and small and is delivering clear, measurable value. Further, there is vast untapped potential for automation to make a significant impact at many organizations, regardless of what level of automation cur-rently exists.

Those in AP who are charged with advocating for more and better automation in many ways have a clear road map for success. Many real-life success stories and plentiful data exist to inform useful insight, best practices and key metrics that can arm you to make a sound, fact-based case for further automation implementation and investment. The key is to become well-versed around automation technologies and how they are being used at different organizations across different industries. Then with that infor-mation, as well as strong data and a strategic plan regarding best practices and sound benchmarking metrics, the path to improved automation can be more easily envisioned, and successfully executed. ■


About The Accounts Payable Network

The Accounts Payable Network (TAPN) is the complete resource for accounts payable, helping more than 36,000 accounting and finance executives at organizations world-wide meet their commitments to accounts payable business process performance.

TAPN provides — in one easy-to-access, cost-effective, online location — insights, analysis, guidance, advice and best practices for AP strategies, technologies, controls, compliance, people and processes. Members have unrestricted access to critical infor-mation guaranteed to help them make smart accounts payable business decisions.

Focus areas include all AP functions: AP metrics and benchmarking, tax and regula-tory compliance, proven solutions to real-world problems, AP automation, case studies, member Q&A networking forums and more than 250 downloadable, customizable AP policies, flowcharts, templates, and internal-control checklists.

TAPN’s highly popular AP tools help compare technologies and AP solution providers, find new ways to streamline operations and enhance controls, and take advantage of ex-tensive educational opportunities. Additional networking opportunities allow members to share problems and solutions with peers “in the trenches” through the public and private forums and discussion groups.

The Accounts Payable Network is completely independent and is not owned by or affiliated with any industry supplier. For further information, please contact The Accounts Payable Network, 121 Free Street, Portland, ME 04101, 207-842-5557, www.TheAccountsPayableNetwork.com


About Esker

Esker is a worldwide leader in document process automation solutions. Addressing all types of business processes, from accounts payable and accounts receivable to order processing and purchasing, Esker on-premises and cloud-computing solutions enable companies to automate the reception, processing and sending of any business document with one platform.

Esker helps over 80,000 companies across the world to reduce the use of paper and eliminate manual processes while improving their productivity, efficiency and envi-ronmental impact. With 41.1 million euros in sales revenue in 2013, Esker operates in North America, Europe and Asia Pacific with global headquarters in Lyon, France, and U.S. headquarters in Madison, Wisconsin. Esker is listed on the NYSE Alternext in Paris (Code ISIN FR0000035818). For more information, visit www.esker.com.

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The State of Automation in Accounts Payable - State of... · The State of Automation in Accounts Payable A Special Report from The Accounts Payable Network ... Accounts Payable European