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Shows Senior Management the Money: Part 4 of 5 – Benchmarking AP Operations

Shows Senior Management the Money - Part 4 of 5 – Benchmarking AP Operations
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In part 1 , part 2 and part 3 of the series, we saw the first three steps of building a winning case to implement an eInvoicing based AP automation solution.

The next step, spoken of in this blog, is to use benchmarking to focus on performance improvement opportunities.

STEP 4: BENCHMARKING ACCOUNTS PAYABLE OPERATIONS

Aggregating and analyzing data of commonly tracked AP benchmarks from a supplier portal not only provides a baseline for calculating savings opportunities but also drives operational improvements.

However, IOFM’s research finds that more than one-third (38.3%) of AP organizations do not benchmark their operations, and 46% do not track Key Performance Indicators (KPIs), for measuring individual and departmental performance.

Learn More: Merlin for AP Automation Software

The Hackett Group’s provides very relevant information for benchmarking your AP operations against the ‘world-class’ organizations. According to The Hackett Group Performance Study, 2015 (and still relevant today!), here are some of the key metrics to benchmark yourself against:

PERFORMANCE AREA PEER GROUP WORLD-CLASS
% of Suppliers Accounting for 80% of Invoice Volume 8% 4.5 %
% Invoice First-pass Match Rate 73% 90%
% Invoices Received Electronically 19% 70%
Days Payable Outstanding (DPO) 35 40
% On-time Invoice Payment 78% 90%
Cost per Invoice $4.80 $2.27
Invoices per FTE 7,126 17,357
Early Payment Discount Taken as % of Available 78% 85%
Early Payment Discount Taken as % of Spend 0.002% 0.11%
Invoice – PO (days) 10.8 3
Invoice Cycle – Non-PO (days) 15.8 3

In the final and concluding part of this blog series, we will focus on the calculation of potential savings which an organization can capture by deploying a supplier eInvoicing portal.

Related Read:

  1. Blog – Ways to Measure Procurement Profit and Loss for your Business
  2. Blog – Shows Senior Management the Money: Part 5 of 5 – Potential Savings Opportunities
  3. Blog – Shows Senior Management The Money: Part 2 of 5 – Overcoming Stakeholder’s Objections
  4. Merlin AP automation AI procurement software Solution
  5. White Paper – Efficient Procurement Measures for Effective Cost Benchmarking
  6. Research Report – Ardent Partners – The ROI of a Best-in-Class Procurement Department
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