How to Make the Most of Your Accounts Payable Data
Data is a key component in driving digital transformation in any organization. Modern businesses have valuable data, but often make little use of it — in fact, most are only accessing about 0.5% of the information available. With more valuable data being created than ever before, there is untapped potential for organizations to leverage it for increased business growth in the next decade.
When looking for areas in your organization to make better use of data, consider your accounts payable department. AP manages important financial data that can provide insight into customer trends and payment preferences, and can be a resource for discovering potential savings in your organization.
By using data more efficiently, the AP department can become an essential component of executive-level decision-making within an organization, helping to develop financial protocol and providing recommendations for improving client experience.
Learn how AP teams can use available data to help businesses drive growth and positive change in 2020.
What Data Can AP Departments Access?
Accounts payable data goes beyond the management of financial transactions in an organization. When used wisely, it can lead to opportunities for business growth as well.
Measuring data within an AP department can reveal important information such as:
- Types of purchases made within the organization.
- Preferred or regularly used methods and time frames of purchasing.
- Typical cash flow within the business.
This data can be used to determine financial habits within an organization, as well as enable the AP department to develop intentional, well-managed relationships with vendors, partners and clients.
How is AP Data Currently Used in Most Organizations?
A healthy financial statement is a priority in most organizations, but it is not always reflected in their relationship with their data. Data from financial statements can aid decision makers in determining opportunities to increase ROI and make better spending decisions.
AP data can also be leveraged to optimize working capital within the department by providing valuable insight on:
- Opportunities to negotiate payment terms.
- Vendor discounts that may be accessible.
- Inventory that may need to be reduced.
- Unprofitable services that need to be made unavailable.
Maximized working capital can provide security over short-term debt and monthly expenses in an organization. Using this information not only promotes financial health (and a comfortable surplus), it makes the AP department a more valuable component of the modern business.
How Automated Accounts Payable Supports AP Data Usage
Digital businesses are seeing an impressive ROI on process automation technology — both in company finances and in the transformation of business operations. The AP department is one of the first areas that business leaders should consider when implementing process automation technology.
AP departments that have digitized and automated key business processes are able to gain insight from its data to improve how they work. A few examples of improved business functions include:
- Easily tracking the number of invoices processed over a determined period of time, allowing the AP team to better assess resources.
- Identifying productivity bottlenecks through automated process reporting, enabling managers to adjust workloads and predict busier and slower times throughout the year.
- Determining the cost per invoice and invoice cycle times for improved AP metrics.
Organizations of any size or industry can benefit from accounts payable automation. Take, for example, Fresno Surgical Hospital, a 27-bed facility located in Fresno, CA that processes over 1,500 invoices per month. After implementing an enterprise content management solution, the hospital saw an increase in cost savings and operational efficiency across departments.
By automating accounts payable with a new ECM system from Laserfiche, Fresno Surgical Hospital saw the following benefits:
- An annual savings of at least $55,000 per year — the result of processing 33% more invoices without the need to allocate additional resources to process those invoices.
- Faster invoice approval time thanks to email notifications sent to managers daily until the invoice is approved. If an invoice is not approved within a week, the controller is notified.
- Simplified expense analysis due to the ease and speed of retrieving information from a digital repository. Information is readily available and easily viewed on screen, which saves thousands of dollars in man hours.
How AP Can Become an Important Component of Executive Business Strategy
“By maximizing insights and recommendations gleaned from data, AP earns its seat at the table with business decision makers,” says Linda Ding, Director of Strategic Services at Laserfiche. To increase the success of AP as a strategic tool in business growth, the department should connect with the procurement team to present a united focus on the importance of maximizing free cash flow. Working closely with the executive team enables the AP department to create a working capital culture within the organization.
To become an essential component of business decision-making, AP teams can make better use of their data to inform executives of financial health and habits within the organization, as well as pinpoint areas for improved digital business functions.
PERI Formwork Scaffolding Engineering Ltd. — a global manufacturer of formwork and scaffolding and a consulting and engineering services provider in the construction industry — is a shining example of improved digital business functions. Once the company began a back-office overhaul of its invoice processing system, it saw the opportunity to further optimize operations by implementing a web portal to provide customers and staff with web-based access to monthly statements and invoices to customers and staff.
The results have been phenomenal. PERI Formwork Scaffolding Engineering Ltd. has seen the following benefits since its digital transformation:
- Reduction in accounts receivable and payable processing times from weeks to one day.
- Controlled access to customers to view invoices, see reminders and complete online payments entirely online.
- Savings of $75,000 a year in printing and paper costs, creating a return on investment in the first year of Laserfiche use.
- The ability to quickly model and execute digital business processes, helping the organization continually improve its customer experience and remain competitive.
“As technology changes, there’s a need to communicate and distribute to customers more efficiently,” says Jacques Lotriet, business analyst for PERI’s Financial Efficiency Projects.
This mindset, coupled with an empowered usage of accounts payable data, allows AP to move beyond its role as a back-office department to become more effectively aligned with executive leadership in driving business growth and digital transformation.