What is the Most Important Piece of Data for an AP Specialist?

 

The role of AP Specialist is not new to business.

The role of an AP Specialist is not new, organisations understand the need to have departmental specialists.

Often the role of a departmental specialist is internally filled, leveraging the knowledge of the department and organisation to deliver real benefit.

More recent is the growing importance of this role and its connection to the Data Officers of an organisation. Indeed, the role of CDO’s and their teams is a relatively new thing to the majority of organisations.

As businesses get better at capturing data, and understand the importance of not just holding it, but understanding and acting on the data, ensuring that they have the right people at departmental level becomes more desirable.

No longer is it enough to simply know the department, organisation, best practices etc. being able to understand and act on data is being seen as vital.

To start with, visibility is key.

Companies of all sizes have a multitude of different departments that make up their business. To deliver the best possible results, businesses require that each department runs as efficiently as possible.

The best way to improve any department is to gain insight of its functions. The more data you are able to see the more control you have.

Simply collecting the data is not enough, and this is where data and departmental specialists come into play, for example an AP specialist who is responsible for understanding financial data.

There is a massive benefit to tracking key metrics within the accounts payable department; allowing you to make monthly, weekly and daily changes to processes that may be hampering your targeted results. Or worse yet, costing you sums of money that could be spent elsewhere.

The more insight in to your financial processes, and how they might not be as efficient as you would like, will affectively change how you look at the invoices coming in, how efficiently you handle the information when it’s in your system and how quickly you pay out.

All this data and information is wonderful for anyone who enjoys achieving but what is the most important piece of data in accounts payable?

Data and metrics are great but what are some of the key metrics in accounts payable?

a key on a keyboard, symbolising the key to visibility

What is the actual cost of an invoice?

After doing some research, scrolling sites, blogs and forums the most common metric that kept appearing was “the cost of an invoice”.

Ideally the total cost to your business to pay someone else should be a major focus. For all organisations there should be a major push to lower the cost of processing an invoice as the easiest ways to achieve this will yield other, sometimes unexpected, results.

Consider; salaries, benefits, IT support, office space, utilities, hardware and equipment, managerial overhead and even down to the tea bags and milk, there are a vast array of major factors that can increase the cost of a single invoice.

Knowing the cost of processing a single invoice is a great starting point and will give you oversight on what areas of the department need to be made more efficient to reduce costs.

Remember, the cost continues the longer that invoice is sat waiting and the more people that need to be involved in the process.

showing visibility of key data

What is your invoice processing time?

The second metric that everyone seems to focus on is invoice cycle time, most commonly referenced as “invoice processing time”.

Simply put, this is how long an invoice takes to be opened, processed, validated, work-flowed, approved and then, finally, paid.

The ability to pinpoint where the processing maybe breaking down is worth its weight in gold. If most invoices are hitting a bottle-neck at the validation stage you would be able to see who is culpable, and more importantly can ask them “why?”

With this insight you can quickly change and make improvements to your processes, this may be removing any validation or even increase the amount of people with authorisation to deal with validating.

As we have seen with governmental legislation, speed of payment is becoming a real focus in the UK, legislation such as Duty To Report Payment Practices sheds light on this key element of business to business interactions.

time taken to process an invoice

Understanding the source of invoice variances.

Along with the cycle time and cost, another piece of critical information is variance/expectations.

This could be any number of issues; a simple discrepancy on an invoice at line item, supplier information not matching with the supplier master data on file, manual keying errors, missing PO numbers, or someone has allocated to the wrong departmental code.

Incorrect information on an invoice will increase the time, effort and cost on processing when it could be better spent on more important duties.

Having the data to pinpoint which companies send the most invoices with the most discrepancies allows your business to engage with the supplier and ensure that changes are made to the processes.

At the end of the day, it is in both parties best interests, you save time and money, your supplier can expect more efficient payments and less time chasing or re-sending invoices.

Use this data to make the suppliers work for you.

As I stated in one of my previous articles “accounts payable comes down to one thing”.

Data is only second to profit when it comes to importance to a business.

Metrics and analytics are the tools to an optimised accounts department, the ability to learn, share and improve should be a focus on anyone from the accounts payable manager to the finance director.

“The better you understand your data the better you understand your business, the power to be able to pin point weakness and build strength”

Post by James Donaldson

James has been with ITESOFT since late 2016. Quickly establishing himself as a genuine automation enthusiast, he is a reliable source for the latest information on Financial Process Automation technologies.

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