Australia and New Zealand
Accounts Payable Benchmark Report 2014 In our third annual Accounts Payable Benchmark Report, we have continued to provide CFOs and accounts payable managers with an accurate and unbiased means of measuring the productivity of their accounts payable operations and comparing that productivity against that of their peers. By sharing this information with you, we hope to provide insights that could help your business become more competitive and efficient, thereby increasing profitability. Whilst this is an objective most businesses are constantly working towards, the Global Financial Crisis and the somewhat subdued performance of the non-mining sector industries in Australia have continued to highlight the importance of cost efficiencies and productivity gains across all aspects of organisational performance. In late 2013 we invited organisations from a broad crosssection of industry sectors in Australia and New Zealand to participate in a survey about their accounts payable systems. This year, organisational size across the sample group was quite different when compared to 2011 and 2012. This has enabled us to examine trends in productivity across large, medium and small organisations and what the impact of change or productivity gains might be for each. This report would not have been possible without the cooperation of all those companies and individuals who generously gave their time to answer our survey and provide insights into their accounts payable practices. I sincerely thank them for their cooperation. Thank you for your continued interest in our reports. I trust you will find this one an informative continuation of what has been presented in previous years. Regards Richard Bates Managing Director Acumen Data Pty Ltd Page i
Executive Summary As in previous years, the survey covered companies that ranged from those with fewer than 50 employees to those employing over. In 2012, the greatest number of companies who responded to the survey was in the 51-100 employee category. However, in 2013 the largest proportion of organisations fall within the 501 employees plus category. This variation is a symptom of a different mix of organisations responding to this year s survey. Invoice volumes are growing In 2011, 28% of organisations reported a decrease in invoice volume. This rose to 43% in 2012, a result largely attributable to ongoing weakness in the economy overall and a significant proportion of organisations experiencing static or even negative growth. In comparison in 2013, only 31% of organisations surveyed reported a decrease in invoice volumes a percentage trend that is returning to more positive territory. Invoice costs for low levels of accounts payable automation continue to increase Continuing the pattern observed in 2011 and 2012, invoice costs for low to medium levels of accounts payable automation continue to increase significantly, driven by inefficiency and higher labour and operational costs. However, organisations with a high level of automation have actually decreased their invoice processing costs. Productivity of accounts payable staff increases significantly the higher the level of automation Whilst productivity for low to medium levels of automation has remained relatively static over the years, productivity has increased significantly for those with a high level of automation. This is partly a symptom of organisational size equating to a higher level of automation, but also demonstrates the clear ability of fully automated accounts payable departments being able to easily absorb additional invoice volumes without having to increase staff numbers. Automation delivers an increased ability to manage fluctuations in invoice volumes and provides the basis for delivering increased productivity in line with business growth. Productivity gains through accounts payable automation are an untapped opportunity that can benefit all sizes of organisation In 2012, less than 5% of the companies surveyed had implemented automation in their accounts payable departments. The poor uptake was attributed to a number of factors including the perceived expense, the economy reducing the inclination for capital investment, the management time required to investigate the implementation of such systems and technical reluctance. The results for 2013 show a different picture, but this is largely due to the size of organisations surveyed. Larger organisations are by extension far more likely to have automated accounts payable processes and the skew towards larger organisations in the sample group has resulted in the survey showing an increased automation level of 24%. However, the reality is that if only 24% of organisations implement some form of automated accounts payable system, this is still surprisingly low. Even though 50% of organisations surveyed in 2013 have more than 350 employees, 67% of organisations still do not automate their accounts payable departments in any way and 9% use some form of hybrid arrangement. Page ii
Executive Summary (continued) Conclusions As this report shows, and what is substantiated by research from other parts of the world, is that accounts payable departments still have a long way to go until automation is the norm. The rate of change is slow and organisations of all sizes are missing a significant cost saving opportunity. 1. Accounts payable department productivity increases significantly with the introduction of automation. 2. The increase in productivity gained from the implementation of automation results in a proportional reduction in the cost of processing each invoice. 3. The greater the degree of automation, the greater the increase in productivity. 4. To date, larger organisations have been more likely to realise the potential of accounts payable automation, which also offers significant benefits to small and medium organisations. Page iii
Contents Introduction Executive Summary i ii Economic Outlook 2 Companies Surveyed by Number of Employees 3 Invoice Volume 4 Impact of Automation on Invoice Processing Costs 6 Impact of Automation on Accounts Payable Productivity 8 by Number of Employees 10 per Accounts Payable Staff Member 14 by Turnover 17 Degree of Automation 20 Productivity for Processing by Software Used 22 Industries Surveyed 24 Conclusions 25 Disclaimer 28 Acumen Data s Accounts Payable Solution 29 CAAPS Case Study 30 Copyright 31 Contact 31 Page 1
Economic Outlook The Australian economy currently sits in what BIS Shrapnel have referred to as a soft patch and is likely to remain there over the next 18 months at least. The Reserve Bank expects growth at between 2% and 3% in 2014. According to the BIS Shrapnel 2014 forecast, the economy is transitioning from a post-gfc stimulus and the second round of mining investment boom led growth, to one of more broadly-based growth. However, the next set of broader growth drivers are slow to come through, resulting in a soft economy. Unemployment is also thought likely to increase gradually over the next year whilst the economy grows more slowly. The outlook is more positive for overseas, with the European and US economies tipped to gather momentum over 2014, despite lingering concerns over debt levels. Source: BIS Shrapnel 2014 Economic Outlook and ABC News online article Reserve bank lowers Australia s growth forecast dated 8 November 2013. Many non-mining related industries continue to suffer in the aftermath of the Global Financial Crisis and have cut costs and deleveraged to strengthen their balance sheets. Given the limited growth forecast for many industries in the near future, significant investments are likely to be up to two years away. Organisations will however continue to actively seek measures that contribute towards efficiency and cost savings. Page 2
Companies Surveyed by Number of Employees As in previous years, the survey covered companies that ranged from those with fewer than 50 employees to those employing over. In 2012, the highest number of survey respondents fell into the 51-100 employee category. However, as can be seen from the charts below, in 2013 the largest proportion of organisations fell within the 501 employees plus category. This variation is a symptom of a different mix of organisations responding to this year s survey. Given the quite contrasting organisational sizes across the sample groups of 2012 and 2013, some of the data cannot be directly compared but has instead been viewed in isolation. Conversely, the contrasting nature of the sample groups allows for some conclusions to be made on the differing trends in productivity between large, medium and small business and the impacts this conceivably has. Number of Companies Surveyed vs Number of Employees 2013 Number of Companies Surveyed vs Number of Employees 2012 Number of Companies Surveyed Number of Companies Surveyed 70 60 50 40 30 20 10 250 200 150 100 50 66 27 12 16 16 8 8 7 7 4 1-50 51-100 101-150 151-200 201-250 251-300 301-350 351-400 401-450 451-501+ Total Number of Employees 193 83 50 57 10 17 4 6 0 9 14 1-50 51-100 101-150 151-200 201-250 251-300 301-350 351-400 401-450 451-501+ Total Number of Employees Page 3
Invoice Volume The majority of organisations did not know exactly how many invoices they process. Without reliable information, organisations are less likely to make staff or systems adjustments. This means they often stick with the statusquo, with costs going up, productivity decreasing and an ongoing failure to identify and then increase internal KPIs. Volumes Decreasing In 2011, 28% of organisations reported a decrease in invoice volume. This rose to 43% in 2012, a result largely attributable to ongoing weakness in the economy overall and a significant proportion of organisations experiencing static or even negative growth. In 2013, only 31% of organisations surveyed reported a decrease in invoice volumes a percentage trend that is moving towards more positive territory comparatively speaking. Volumes Increasing In 2011, 63% believed that the number of invoices processed had increased over the previous year. Whereas this dropped to 43% in 2012. In 2013 the comparison result remains similar, at 45%. Unsure 24% of respondents were uncertain whether their invoice volume had increased or decreased. Previous results indicated approximately 12% of organisations felt their invoice volumes remain unchanged. The majority of organisations surveyed did not know exactly how many invoices they process each month. Without reliable information, organisations are less likely to make staff or systems adjustments, as there is little or no way to measure return on investment. This in turn means organisations often stick with the status-quo, with costs going up, productivity decreasing and an ongoing failure to identify and then increase internal key performance indicators. Overall, 2013 demonstrates a slight improvement in trends when compared to 2012. Page 4
Invoice Volume Comparison 2013 24% unsure of invoice volume 45% reported Increased invoice volume 31% reported Decreased invoice volume 15% same invoice volume Invoice Volume Comparison 2012 43% reported Increased invoice volume 42% reported Decreased invoice volume 9% same invoice volume Invoice Volume Comparison 2011 28% reported Decreased invoice volume 63% reported Increased invoice volume Page 5
Impact of Automation on Invoice Processing Costs Invoice processing cost comparisons clearly demonstrate how valuable accounts payable automation is to the bottom line of any organisation, no matter the size or scale. The cost of invoice processing is closely linked to the level of accounts payable automation and productivity. The levels of automation shown are: 1. No automation. 2. Partial automation, such as scanning combined with automatic information capture from the invoice. 3. Full automation, comprising scanning and information capture coupled with a business rules engine to enable straight through processing of the majority of invoices. Continuing the pattern observed in 2011 and 2012, invoice processing costs for Level 1 and Level 2 automation continue to increase significantly, driven by inefficiency and higher labour and operational costs. Organisations with Level 3 automation however have actually decreased their invoice processing costs. The gulf between Level 1 and Level 2 automation costs compared to Level 3 grows from year to year a clear demonstration of just how valuable accounts payable automation is to the bottom line of any organisation, no matter the size or scale. Cost per Invoice vs Level of Automation 2013* Please note the invoice processing cost is calculated using salary data found in The 2013 Hays Salary Guide: Salary + Recruiting Trends. Cost per Invoice $7 $6 $5 $4 $3 $2 $1 $6.60 $4.16 $1.24 Level of Automation 1 2 3 Page 6
Cost per Invoice vs Level of Automation 2012* Cost per Invoice vs Level of Automation 2011* Cost per Invoice Cost per Invoice $16 $14 $13.72 $12 $10 $8 $6 $4 $3.37 $2 $1.57 1 2 3 Level of Automation $7 $6.22 $6 $5 $4 $3 $3.05 $2 $1.48 $1 1 2 3 Level of Automation * Please note that the above per invoice processing cost calculations are based on a typical AP staff member s wages only. In reality, the processing costs per invoice would be much higher if we had also taken into consideration employment on-costs (eg. super, worker s compensation, payroll tax etc), share of office costs (eg. electricity, rent, furniture, equipment etc), management wages, overheads and other costs. Page 7
Impact of Automation on Accounts Payable Productivity Automation delivers an increased ability to manage fluctuations in invoice volumes and provides the basis for delivering increased productivity in line with business growth. Productivity is measured as the number of invoices processed per accounts payable staff member, per month. The levels of automation shown are: 1. No automation. 2. Partial automation, such as scanning combined with automatic information capture from the invoice. 3. Full automation, comprising scanning and information capture coupled with a business rules engine to enable straight through processing of the majority of invoices. As the graphs clearly show, Level 3 automation has by far the most significant impact on accounts payable productivity. Whilst productivity for Level 1 and Level 2 automation has remained relatively static over the years, productivity has increased significantly for Level 3 automation this year. This is partly a symptom of organisational size equating to a higher level of automation, but also demonstrates the clear ability of fully automated accounts payable departments being able to easily absorb additional invoice volumes without having to increase staff numbers. Automation delivers an increased ability to manage fluctuations in invoice volumes and provides the basis for delivering increased productivity in line with business growth. The fact that productivity for Levels 1 and 2 is fairly stagnant across all years demonstrates its lack of flexibility to deliver business improvement. These organisations are effectively stuck in a rut with systems that will not deliver long-term productivity benefits unless the level of automation is increased. Productivity vs Level of Automation 2013 Invoices per Accounts Payable Staff Member per Month 4000 3 3000 2 1 640 1,014 3,402 Level of Automation 1 2 3 Page 8
Productivity vs Level of Automation 2012 Invoices per Accounts Payable Staff Member per Month 2 2,344 1 1,093 269 1 2 3 Level of Automation Productivity vs Level of Automation 2011 Invoices per Accounts Payable Staff Member per Month 3000 2 1 593 1,209 2,492 Level of Automation 1 2 3 Page 9
by Number of Employees Business growth requires increased invoice processing efficiency or greater staff resources to handle growing volumes of invoices. The following charts show the relationship between the total number of employees in a company and the number of invoices processed. The number of employees varies depending on the overall general financial size of the organisation but also the industry sector and number of separate locations or branches operated by the organisation. For the sample sets of 2011 and 2012, organisation size tended towards the smaller end of the scale and invoice volumes in 2012 were less than those of 2011. In 2011 and 2012, invoice volume increased with employee numbers, but not significantly. However, the top to bottom range of invoice volume by organisation size increased significantly with company size. This is also true of 2013. Organisations employing between 451- staff receive an average of 3,675 invoices per month but in reality the range extends from more than 9,000 to less than 1,000. Smaller organisations, as is logical, feature a much smaller range. Whilst there is no strong linear relationship, it is clear that invoice volume increases somewhat proportionately with organisational size, rising more significantly once an organisation reaches a size of 451+ employees. Business growth therefore requires increased invoice processing efficiency or greater staff resources to handle growing volumes of invoices. Page 10
2013 vs Number of Employees per Month 4000 3 3000 2 1 459 659 1,434 582 807 1,446 2,000 1,142 3,675 1-100 101-150 151-200 201-250 251-300 301-350 351-400 401-450 451- Number of Employees vs Number of Employees THIS IS A CONFIDENCE INTERVAL BAR GRAPH - REFER TO DIAGRAM BELOW per Month 9000 8000 7000 6000 0 4000 3000 100 200 300 400 Number of Employees vs Number of Employees this graph illustrates whether or not there is a linear relationship between the variables per Month 2 1 100 200 300 400 Number of Employees Accuracy of Data The amount of data captured has a direct impact on its accuracy. Due to the varying sample sizes for organisation size and industry representation, it was felt neccessary to illustrate the relative confidence in the data by use of confidence interval bars. This symbol indicates that there was a lot of data available and therefore the confidence in the accuracy of the point is high. This symbol shows the amount of data available is small so therefore the confidence in the accuracy is lower. Page 11
2012 vs Number of Employees per Month 900 800 700 600 400 300 200 100 398 384 458 507 673 792 833 1-50 51-100 101-150 151-200 201-250 251-300 301-350 Number of Employees vs Number of Employees THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 per Month 1800 1600 1400 1200 800 600 400 200 50 100 150 200 250 300 350 Number of Employees vs Number of Employees this graph illustrates whether or not there is a linear relationship between the variables per Month 2 1 50 100 150 200 250 300 350 Number of Employees Page 12
2011 vs Number of Employees Number of invoices per month 2 1 419 695 1,458 1,647 1,677 1,477 2,003 1-50 51-100 101-150 151-200 201-250 251-300 301-350 Number of Employees vs Number of Employees THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 Number of invoices per month 7000 6000 0 4000 3000 50 100 150 200 250 300 350 Number of Employees vs Number of Employees this graph illustrates whether or not there is a linear relationship between the variables Number of invoices per month 2 1 50 100 150 200 250 300 350 Number of Employees Page 13
per Accounts Payable Staff Member The trends in the following graphs are more linear. It is clear that increased invoice volumes combined with a higher level of automation in larger organisations contribute significantly to accounts payable productivity. Organisational size appears to be the main motivator at present for changes in productivity and those productivity gains, whilst they could benefit almost every size of organisation, do not do so as yet, with benefits primarily felt at the top end of the business size scale. Overall, productivity per accounts payable staff member dropped in 2012 and has risen significantly in 2013. Across 2011, 2012 and 2013, productivity rises with each staff member up until the sixth. Productivity drops with a sixth staff member perhaps due to the need for team management and other non-productive time. 2013 vs Number of Accounts Payable Staffffffffffffffff Processed per Month 800 600 400 200 0 675 1 937 645 522 516 453 415 1.5 2 2.5 3 4 5 646 6 Number of Accounts Payable Staff vs Number of Accounts Payable Staffffffffffffffff THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 Processed per Month 4000 3 3000 2 1 1 1.5 2 2.5 3 4 5 6 Number of Accounts Payable Staff vs Number of Accounts Payable Staffffffffffffffff this graph illustrates whether or not there is a linear relationship between the variables Processed per Month 800 600 400 200 0 1 1.5 2 2.5 3 4 5 6 Number of Accounts Payable Staff Page 14
2012 vs Number of Accounts Payable Staffffffffffffffff Processed per Month 1400 1200 800 600 400 200 344 427 776 965 833 1160 1 2 3 4 5 6 Number of Accounts Payable Staff vs Number of Accounts Payable Staffffffffffffffff THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 Processed per Month 2 1 1 2 3 4 5 6 Number of Accounts Payable Staff vs Number of Accounts Payable Staffffffffffffffff this graph illustrates whether or not there is a linear relationship between the variables Processed per Month 1 0 1 2 3 4 5 6 Number of Accounts Payable Staff Page 15
2011 vs Number of Accounts Payable Staffffffffffffffff Processed per Month 3 3000 2 1 416 849 1,108 1,240 1,689 3,000 2,875 <1 Number of Accounts Payable Staff 1 2 3 4 5 6 vs Number of Accounts Payable Staffffffffffffffff THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 Processed per Month 6000 0 4000 3000 <1 Number of Accounts Payable Staff 1 2 3 4 5 6 vs Number of Accounts Payable Staffffffffffffffff this graph illustrates whether or not there is a linear relationship between the variables Processed per Month 3 3000 2 1 <1 1 2 3 4 5 6 Number of Accounts Payable Staff Page 16
by Turnover Invoice volume by turnover has generally increased from 2012 levels, as has been demonstrated by the results from a number of survey questions. However, levels have not reached those of 2011 yet. Once again, organisations with a $100 million plus turnover process a significantly higher number of invoices than their small and medium sized counterparts. This demonstrates that turnover, staff numbers and invoice volume are closely connected. 2013 vs Turnover per Month 4000 3 3000 2 1 478 517 419 917 588 697 883 790 900 740 3,560 <$10 $10-$20 $20-$30 $30-$40 $40-$50 $50-$60 $60-$70 $70-$80 $80-$90 $90-$100 $100+ Turnover per Year (million) vs Turnover THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 per Month 0 4000 3000 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $100+ Turnover per Year (million) vs Turnover this graph illustrates whether or not there is a linear relationship between the variables per Month 1 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Turnover per Year (million) Page 17
2012 vs Turnover per Month 700 600 400 300 200 100 392 362 448 454 653 409 <$10 $10-$20 $20-$30 $30-$40 $40-$50 $50-$60 Turnover per Year (million) vs Turnover THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 per Month 1400 1200 800 600 400 200 $10 $20 $30 $40 $50 $60 Turnover per Year (million) vs Turnover this graph illustrates whether or not there is a linear relationship between the variables per Month 1 $10 $20 $30 $40 $50 $60 Turnover per Year (million) Page 18
2011 vs Turnover per Month 1800 1600 1400 1200 800 600 400 200 527 655 1,023 1,261 1,494 1,575 <$10 $10-$20 $20-$30 $30-$40 $40-$50 $50-$60 Turnover per Year (million) vs Turnover THIS IS A CONFIDENCE INTERVAL BAR GRAPH REFER TO DIAGRAM ON PAGE 11 per Month 2 1 $10 $20 $30 $40 $50 $60 Turnover per Year (million) vs Turnover this graph illustrates whether or not there is a linear relationship between the variables per Month 1 $10 $20 $30 $40 $50 $60 Turnover per Year (million) Page 19
Degree of Automation In 2012, less than 5% of the organisations surveyed had implemented automation in their accounts payable departments. The poor uptake was attributed to a number of factors including the perceived expense, the economy reducing the inclination for capital investment, the management time required to investigate the implementation of such systems and technical reluctance. The results for 2013 show a different picture, but this is largely due to the size of the organisations surveyed. Larger organisations are by extension far more likely to have automated accounts payable processes and the skew towards larger organisations in the sample group has resulted in the survey showing an increased automation level of 24%. Even though 50% of organisations surveyed in 2013 have more than 350 employees, 67% of organisations still do not automate their accounts payable departments in any way and 9% use some form of hybrid arrangement. In truth however there is a significant opportunity for organisations of all sizes to cut costs and increase efficiency through accounts payable automation. One barrier to the implementation of accounts payable automation is that there is no one-size fits all solution. There are many different options available in the marketplace and hence decision-making can appear more complex and costly than it perhaps needs to. Of those industries that have implemented automation the split is reasonably even across industry sectors with only Transport, Communications, Power and Utilities demonstrating significant investment in this form of technology followed by Wholesale and Retail Trade. This makes sense given the high number of supplier transactions within these industries. Industry Sector Automation 2013 100% 90% 80% 70% 60% Organisations that have implemented Automation 50% 40% 30% 20% 10% 14% 21% 18% 40% 29% 23% 22% 25% Agriculture and Forestry and Fishing Mining and Construction Manufacturing Transport, Communications, Power and Utilities Wholesale and Retail Trade Finance, Insurance and Real Estate Health, Education and Services Public Administration Page 20
Automation Level 2013 67% NOT AUTOMATED 24% Automated 9% hybrid or other 96% NOT AUTOMATED Automation Level 2012 4% Automated Page 21
Productivity for Processing by Software Used The overall number of invoices processed per person per month has increased from an average of 466 in 2012 to 692 in 2013. This result is consistent with the reported increases in overall invoice volume when compared to last year and the larger organisational size typical of the 2013 sample group. In 2013, Oracle JD Edwards software has overtaken SAP as the most efficient by a significant margin. However the efficiency of almost every other software type has also increased. Again, this is likely driven by organisational size but also reflects a slight improvement in economic conditions and greater invoice volumes. For the purposes of this analysis we have only listed software type if it was used by a minimum of five organisations within the survey sample group. Hence, some of those that were commonly found in last year s sample group, such as Pronto, do not feature in the 2013 findings. Invoices per Person per Month 2013 2 1 2,205 1,015 1,143 1,082 547 634 287 481 324 679 Accpac Great Plains Custom Dynamics Myob Oracle SAP Sun Technology Solution One Unspecified Invoices per Person per Month 2012 1600 1400 1200 800 839 1,550 600 485 400 200 159 207 195 156 135 Accpac Great Plains EDFAS Myob Pronto SAP Sybiz Technology One Page 22
Software Usage by Percentage of Businesses Surveyed for this Report 2013 42% other / specialised 2% ACCPAC 3% great plains 4% custom solution 3% Dynamics 3% MYOB 11% Oracle 18% Sap 4% Unspecified 4% Sun 5% Technology one Software Usage by Percentage of Businesses Surveyed for this Report 2012 3% Great Plains 2% Finance One 2% EDFAS 2% Accpac 20% MYOB 4% Pronto 3% SAP 2% Sybiz 2% Technology one 58% other / specialised Page 23
Industries Surveyed In 2013, the largest group surveyed was Health, Education and Services, followed by Manufacturing and then the Wholesale and Retail Trades. In the previous year s survey the main groups surveyed were Transport and Communication, followed by Public Administration and then Finance, Insurance and Real Estate. percentage of companies with automated accounts payable than in the previous year. We can reasonably assume this is due to larger organisations and industries currently operating in highly competitive environments making up a larger percentage of the companies surveyed. The differences in industries surveyed (both in type and organisational size) make comparison between the 2013 and 2012 results difficult. For example, you will note a higher Industries Surveyed 2013 35% 30% 33% 25% 20% 18% 15% 17% 10% 5% 3% 6% 9% 6% 7% Agriculture and Forestry and Fishing Mining and Construction Manufacturing Transport, Communications, Power and Utilities Wholesale and Retail Trade Finance, Insurance and Real Estate Health, Education and Services Public Administration Industries Surveyed 2012 35% 30% 25% 20% 26% 15% 17% 10% 5% 3% 8% 7% 14% 6% 5% 13% 02% 02% 2% Agriculture Forestry Construction Finance, and Fishing Insurance and Real Estate Manufacturing Public Retail Trade Administration Services Transport and Wholesale Communications Trade Page 24
Conclusions Technology holds the key toward transitioning accounts payable from a cost centre into a profit centre and making the AP professional s job strategic and even more relevant. Automation can help AP departments save time and money, reduce errors, and recover dollars lost to unrefined processes. Mark Brousseau, 21 April 2013, Accounts Payable Automation Efficiency Leaders Blog The data and findings within this report demonstrate that: 1. Accounts payable department productivity increases significantly with the introduction of automation. 2. The increase in productivity gained from the implementation of automation results in a proportional reduction in the cost of processing each invoice. 3. Whilst accounts payable automation is on the increase, it remains an untapped opportunity for organisations of all sizes. Small to medium sized organisations in particular lack automation, but even large organisations are less automated than would perhaps commonly be assumed. 4. The greater the degree of automation, the greater the increase in productivity. 5. That the use of automation is much more commonplace the larger the organisation in terms of turnover and staff numbers. 6. There are significant productivity and efficiency gains that could be made by medium and small organisations by adopting accounts payable automation that would contribute significantly to business improvement. Page 25
Conclusions (continued) When a routine job is automated, the resulting efficiencies and cost savings open up learning and development opportunities for staff. The shift caused by automation is one that moves staff from routine work to knowledge work and this contributes significantly to continuous business improvement and staff job satisfaction. Perceived barriers to automation With automation shown to be the best route to increased productivity, one might wonder why more organisations have not employed this tool in their accounts payable departments. There are many reasons for this: 1. Within some organisations, internal IT departments can be perceived as a roadblock. Understandably, IT departments handle many requests for various competing projects with limited resources. So it is important to build a compelling business case to ensure your project gains the appropriate support. 2. There is no one size fits all software or solution on the market. This can add complexity to the decision-making process but also delivers the benefit of a tailored solution to meet an organisation s existing and future needs. 3. There is a perception that accounts payable automation requires an all or nothing approach, which again adds to perceived complexity and effort. In fact automation can take place step by step. 4. Another factor, according to the Accounts Payable Automation Efficiency Leaders Blog (Mark Brousseau, 21 April 2013), is the fear that customers will walk away if you ask them to do something new or different but in reality this is highly unlikely. 5. Finally, in many organisations, there is a fear of automation and that it might place jobs at risk. The Collaborative Planning and Social Business Blog addressed this fear in a post entitled Automation Elevating Workers, Not Eliminating on October 26, 2013. While automation undoubtedly has a short term effect on particular workers who have grown accustomed to their present habits, it does not show any trend of decreasing the overall size of the economy, or of decreasing the number of jobs available. When a routine job is automated, the resulting efficiencies and cost savings open up learning and development opportunities for staff. The shift caused by automation is one that moves staff from routine work to knowledge work and this contributes significantly to continuous business improvement and staff job satisfaction. Page 26
Conclusions (continued) Benefits of Accounts Payable Automation Complete visibility of the financial process. Save time through faster processing. Save space through electronic document management. Save money through increased efficiency. Improved disaster recovery through the ability to backup electronic data off-site. Improved managerial oversight through electronic tracking and management. Reduced fraud through clear approvals and authentication. Improved job satisfaction through the reduction of mundane and repetitive tasks. Availability of data reporting with which to continuously improve business functions and heighten the return on investment in automated processes. Recommendations when considering accounts payable solutions for your organisation: 1. Research and capture the key data relevant to your business. For example: number of invoices, number of staff, the number of invoices paid on time, compliance with purchase orders if used etc. Use the number of transactions as the measure, not the dollar value. 2. Conduct a workshop to map out the flow of invoices. Ensure you are detailed. Note the percentage of invoices that go through each path. For example, 12% of invoices have incorrect purchase order details. 3. For each exception, note the amount of time taken to fix it. 4. Document the special processes that are unique to your business. For example, for this entity or branch we process these invoices differently. 5. Now you should have the data to create a business case for change and a specification you can show potential vendors. Ask vendors to suggest solutions along with the estimated set-up and ongoing costs. Be open to different approaches. 6. Involve your accounts payable staff in designing the ultimate solution. The earlier you involve the team the better their buy-in to the project. 7. Start the implementation ensuring you allow time for extensive testing. 8. Review the results and system reports with the vendor every month so that the solution constantly improves. They should have the expertise to read the data and recommend improvements. Compare the results with the original data. Page 27
Disclaimer The Accounts Payable Benchmark Reports are commissioned by Acumen Data Pty Ltd. The information provided has been collected and analysed independently and Acumen Data Pty Ltd has had no influence on or input to the findings. Most of the automation equipment, software and services referred to in this report are offered by our company, Acumen Data Pty Ltd. Our objective is to provide information that will help organisations become more efficient and more profitable, particularly in relation to their accounts payable function. To that end, we make every effort to ensure that the information presented is accurate and unbiased. Page 28
Acumen Data s Accounts Payable Solution Companies employing high levels of automation in their accounts payable departments typically save 70% on related labour costs. CAAPS stands for Complete Automated Accounts Payable Solution. As the name suggests, CAAPS will completely automate your accounts payable process, increasing productivity and accuracy through reduced manual handling of invoices and remittances. How it works: Data captured from your invoices is put through a Business Rules Engine, which compares it with extracts from your organisation s financial systems (e.g. open purchase orders, goods receipted, vendor master file). Based on your established business rules, CAAPS can then determine which invoices are acceptable to pay and which require exception handling or further approvals. CAAPS workflow engine then takes over to route invoices directly to the employees best authorised to handle them. The workflow engine sends reminders and can escalate actions as well as generate audit and KPI reports, which can be run at every stage of the process. To ensure the solution is optimised for your organisation, we spend as much time as necessary, often including a three day workshop to fully document your unique business rules. Engineered for efficiency. Other benefits: 1. Increased transparency and monitoring of financial and other performance criteria, and vastly reduced potential for fraud with access control and full audit trail reporting. 2. Improved visibility of financial commitments, in real time. 3. Reduced manual filing, handling and storage expenses through electronic storage of data. Authorised staff can also access the data securely from multiple locations. 4. Increased compliance with purchase orders. 5. Improved staff morale, productivity and retention by eliminating mundane, repetitive tasks and better management of resources during peak periods. 6. Improved relationships with suppliers who are paid on time and with less fuss. Page 29
CAAPS Case Study: TSC Group Holdings The desire to reduce overheads, increase working capital and improve data quality and supplier relationships motivated industrial service provider TSC Group Holdings Pty Ltd to move to an automated accounts payable system. To find the best software solution for their business, TSC evaluated a number of providers based on value, functionality and internal requirements. Central to requirements was a system that delivered a fast turnaround time for incoming invoices to ensure costs aligned with purchase orders and accurate billing. Within weeks of the Acumen Data Complete Automated Accounts Payable Solution (CAAPS) going live, 85% of business invoices were being processed through the automated system and TSC cited reduced labour and archiving costs, fewer lost documents and eliminating the risk of duplicate payments among the key benefits experienced. Electronic storage of invoices has also brought benefits, allowing the invoices to be easily accessed from different sites and related support tasks to be shared between locations. Video guides and workshops alongside cross-functional management reviews aided system implementation, whilst ongoing monthly reviews and program upgrades continue to improve functionality. TSC Group Transformation Manager Conor McNamara offered the following tips to organisations looking at automating their accounts payable system. 1. Set a clear baseline, from which benefits can be measured. 2. Set targets that are unique to your organisation and based on clearly understood objectives. 3. Ensure all stakeholders are represented during the functional specification exercise. 4. Assign a dedicated project manager. 5. Don t underestimate the change management side of the project to maximise the benefit. 6. Champion the solution at all levels of the organisation. 7. Support continuous measurement - and therefore continuous improvement. About TSC Holdings TSC Group Holdings was established in 2012 and is the holding company for a group of industrial service businesses that comprise Trilogy Building Services and Spectrum Fire & Security in Australia and Cowley Services in New Zealand. The businesses provide a range of technical maintenance services and small-scale fit outs for commercial and industrial HVAC (heating, ventilation and air conditioning), refrigeration, fire safety as well as security. TSC Holdings processes between 10-12,000 invoices a month and employs six accounts payable staff. Page 30
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