Special Report: The Future of AP

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1 The Future of Accounts Payable Five Top Transformative Changes Coming to AP What lies ahead for Accounts Payable and Shared Services? In these highly volatile and challenging economic times, can AP leverage technologies and processes in ways that increase their strategic relevance within their organization? This report reviews five top changes that are coming to the AP industry which have the potential to dramatically increase the value AP / Shared Services can bring to its parent organization. These changes point the way forward, identifying new processes, methods and mind sets to help drive manual labor out of AP processes, while significantly improving accuracy and efficiency. Special Report: The Future of AP The five changes are: 1. Increased Attention on the Quality of Supplier Information 2. Supplier Networks Become a Reality 3. Increased Levels of Technology Automation in AP Systems & Processes 4. Buyers & Suppliers Collaborate 5. More Cooperation Between Finance & Procurement 1. More Focus On the Quality of Supplier Information Maintaining accurate supplier information is an elusive goal, but it is increasingly seen as a critical goal in AP departments. Lavante benchmarking data indicates that every year over half of any company s suppliers will change some significant attribute. These changes ranging from primary contact, physical address, or can dramatically affect an organization s ability to interact with that supplier and maintain transactional excellence. The table below gives a quick look at the market s understanding of data quality issues: 2001: A study by the Data Warehousing Institute noted Poor data quality costs U.S. businesses more than $600 billion per year 50% of survey respondents had no plans to implement data quality improvements 78% of respondents said their organizations need additional education 2006: Gartner reported Organizations are beginning to realize that data quality is a critical business issue and that poor data quality can hurt them. Learn how to develop a methodology that will allow your organization to execute a successful data quality improvement effort. Dale Kutnick, SVP, Director of Research, Gartner 2009: A Chartered Quality Institute study uncovered 63% of organizations don t know the dollar impact of poor data quality 33% rated their data quality as poor at best 4% rated their data quality as excellent 2011: Spend Matters research report noted A lack of good vendor data can hurt your organization in more ways than you might think from exposure to vendors with credit issues, to reliance on proprietary suppliers for critical components, to the more pedestrian (yet costly) issues that can arise from using vendors not in compliance with your terms and policies.the lack of consistent, high-quality supplier information is costing the typical Global 2000 company tens of hundreds of millions of dollars annually! Jason Busch, Spend Matters Perspective, Developing and Maintaining Accurate Supplier Data - 1 -

2 Indeed, a rapidly-decaying vendor database has real hard costs associated with it. Consider how inaccurate vendor data would hamper your ability to introduce new corporate terms & conditions to your suppliers, notify vendors of changes in remittance advise routing, or in preparing to implement a new einvoicing or ERP system. There is an enormous financial upside to improving and maintaining the highest quality of supplier data. And, there are technologies that help in cleansing and maintaining an always current vendor data base. Increased attention from industry analysts and technology companies are focusing attention on a new vendor data management market and technology providers (i.e. Jigsaw and Lavante) deliver solutions to help companies effectively automate this process. Improving supplier data offers a great benefit across the larger procure-to-pay life cycle by providing both procurement and finance with one uniform, single source of truth that will drive improvements throughout the P2P or source to settle process. 2. Supplier Networks Become a Reality Simply put, a supplier network is inevitable. Numerous software providers are emerging and gaining momentum as network providers, although a clear market leader is yet to rise to the top. It is obvious that AP professionals are increasingly interested and excited to leverage the benefits and functionality that a comprehensive supplier network can offer. This critical need for such an automated social network approach is underscored when you consider many resources both staff time and precious budget dollars that AP departments devote to securing and maintaining current vendor data current. Lavante benchmark data show that only 15% of suppliers respond to mass requests for information, and their contact data changes quickly. 50% of AR data and 20% of HQ data changes on an annual basis. This costs enterprises hard dollars, with companies losing between $600-$900K annually per billion in spend. Supplier networks are being driven forward for two critical reasons: An Increasingly Accepted Communications Model: An online network most closely resembles what is fast becoming the favored means of communication amongst diverse and dispersed groups social media. Instant access to informal product reviews (consider Yelp, or product reviews on Amazon), or instantly communicating to a divers group using Facebook or Twitter, or using Linked-in to seamlessly communicate to professionals well beyond your personal network. These same expectations are now part of many standard business processes, which will improve connections, and speed communications. Delivers Mutual Benefits: A comprehensive supplier network should deliver equal benefits to both the supplier and parent company. Corporations will profit from always-current information and a single repository of related information (Tax IDs, bank info, etc), while the network has the potential to leverage registrations across common corporations, and streamline communication efforts. Ultimately the winning technology will deliver the greatest benefits across both populations in order to drive adoption. 3. Technology Provides New Ways to Automate AP Systems & Processes Technology will play the leading role in automating AP processes. It is perhaps the single-most called out area in any future of AP discussion, which also evokes great passions and opinions. While it is largely understood that automation is inevitability, it is important to consider the potential impact automation will have on AP staff. Very often, technology is seen as a threat, with the power to reduce staff and eliminate AP jobs. While this can be the case, automation shouldn t automatically be included with outsourcing and off-shoring as an automatic job-killer. The process of moving from manual to automated processes will, no doubt, alter the staffing landscape. But, often times, the focus should be redirected from potential job losses to the positive impact automation can have in moving staff into to more strategic roles. This will serve to enhance both the individual and departmental value within the organization. Here are just a few areas where automation can be used to streamline AP processes and free-up staff time to work on tasks that are not as well-suited to a technology solution

3 einvoicing: According to a recent Aberdeen report, 77% of incoming invoices are paper-based. The report goes on to state that paper invoices and manual processing continue to hamper accounts payable operations, keeping suppliers in the dark and failing to give finance the visibility it needs to actively manage the organizations cash positions. This report looked at the performance of a range of company s handling of invoicing, and showed that Bestin-Class performers which used technology took 3.8 days to process a single invoice, at a cost of $3.09/ invoice. These companies represented the top 20% of those surveyed. Contrast that to the bottom 30%, or the Laggards that did not employ technology, which took 20.8 days to process a single invoice at an average cost of $38.77! Moving your company from a Laggard to Best-in-Class would go a long ways towards meeting the top pressures in driving AP improvements: corporate directives to lower costs, and lack of visibility into invoices and AP documents. Definition of Maturiny Class Best-in-Class: Top 20% of aggregate performance scorers Industry Average: Middle 50% of aggregate performance scorers Laggard: Bottom 30% of aggregate performance scorers Mean Class Performance 3.8 days to process a single invoice $3.09 average cost to process a single invoice 4.1% year-over-year increase in early payment discount 9.7 days to process a single invoice $15.61 average cost to process a single invoice 1.3% year-over-year increase in early payment discount 20.8 days to process a single invoice $38.77 average cost to process a single invoice 0.5% year-over-year increase in early payment discount Automated Statement Audit Processes: Applying technology to the traditional, manual statement audit process delivers several very real benefits. As outlined in a recent Paystream Advisors white paper, Statement Audits: An Untapped Source of Dollars for Your Company*, automation drives continuous connections to the breadth of suppliers, uncovering multitudes of more credits on a continuous basis. Other benefits noted in the report include: quick results, ongoing recoveries, continuously cleansed supplier data, and proactively identifying and resolving process issues with suppliers. In order to perform a true automated statement audit, the report noted a solution must: Be technology-enabled Target the breadth of suppliers Validate credits with suppliers prior to submission Provide real-time reporting in insights Minimize impact on your organization Support ongoing processes & credits 4. Buyers & Suppliers Collaborate The need to bring buyers and suppliers closer to together is not a new concept, but it is one that is gaining more attention and momentum. The potential benefits from reducing transactional and administrative costs, to streamlining business processes are just too great to ignore or push to some undetermined future date. There are, however, challenges that must be overcome, as each of these departments has its unique set of requirements. These objections can be overcome by focusing on better connections between buyers and suppliers, which then helps drive more timely access to better data

4 The first step in the process is to improve the electronic connections between suppliers and buyers. Moving away from rolodex or paper-based, manual processes to electronic, automated processes serves to dramatically speed transaction times while reducing errors. It also provides the opportunity to proactively use current data to drive better deals for your company. Timely access to current data will help in setting better terms, more advantageous payment schedules, the ability to leverage product delivery issues, or to best determine payment timing strategies. This all will help improve cash flow and streamline business processes for added cost savings. Suppliers Shorter sourcing cycles Improved visibility to demand Smaller inventories Faster DSOs with reduced risks Better buyer relationships Increased accuracy in deliveries with shorter delivery times Reduced processing costs Efficiencies through business process integration Enhanced error handling Buyers Improved visibility Better supplier control Invoice process automation with high matching rates Dropping invoice handling cost Less invoice errors, double payments Standardized rich invoice content Process savings Improved cash flow P2P audit trail From maverick to controlled purchasing 5. More Cooperation between Finance & Procurement Improving the working relationships between finance and procurement is another area of potential organizational benefits, and one we predict is already in play. Considering the different perspectives and roles that Procurement, AP, Finance, and Suppliers play within the P2P cycle, the potential for departmental disconnects are great, making the benefits to gain in harmonizing the connections equally as significant. Accounts Payable is in a unique position to be the key convergence point for Procurement, Finance and Suppliers. Placed at the center of these three departments, AP has the opportunity to add great value to the overall organization. For example, where procurement is focused on what is spent, AP has the data to know what is spent, and when it is delivered. With AP at the center of these three organizations, they are in a position to deliver critical, timely data to procurement enabling them to negotiate better terms, improve deliver and receipt of goods, etc. In this scenario, AP takes on a much more strategic and indispensable role in achieving organizational goals. These are just a few of what we see as changes that will have the greatest impact on the Accounts Payable and Shared Services environments over the next year. Change will inevitably alter the working environment, but it is our vision that these changes can be a positive transformative force within the the finance organization. The five changes outlined here are just part of what will help AP and Shared Services become an ever more relevant and strategic part of the enterprise

5 This report was developed by: Lavante is the leader in on-demand supplier management solutions, including recovery audit and supplier information management applications. Built with advanced, patented technology, Lavante delivers to the financial arena a new standard in efficient technology-driven solutions that allow companies to quickly drive dollars to the bottom line, improve supplier communications, and assure high supplier data quality. Lavante solutions are deployed across Fortune 1000 enterprises including the hospitality, retail, entertainment, manufacturing, and medical industries. Headquartered in San Jose, California, Lavante is privately held and was founded in For more information please visit For more information about Lavante please call Basware is the global leader in purchase-to-pay solutions with more than 1,000,000 users in over 60 countries. The Basware Open Network for e-invoice and purchase message transactions today connects more than 320,000 companies globally. With Basware, an organization can reduce the cost of buying and paying for goods and services and gain visibility and control of its entire spending process by automating manual processes, from sourcing, contract management, purchasing and supplier collaboration to invoice automation. Basware solutions and services enable a company to improve its cash position, optimize working capital and maximize the agility of its finance operation across the purchase-to-pay cycle. The solutions are distributed and implemented, either on site or as a service, in Europe, the U.S., and Asia-Pacific through an extensive network of Basware offices and business partners. The company s U.S. business, Basware, Inc., is headquartered in Stamford, Conn. More information can be found at For more information about Basware please call (203) * Please visit to download a complimentary version of this industry white paper