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Benchmark against the best in class

Sept. 26, 2019
Any time you try to make a significant change, it’s a good idea to benchmark yourself against the businesses that are performing the best.

Any time you try to make a significant change in your operation, it’s a good idea to benchmark yourself against the businesses that are performing the best in the area you want to improve. It is no different with your accounts payable operation. Best-in-class companies are already making significant strides in transforming the AP function.

There are several key performance indicators (KPIs) that are used to measure AP success:

  • Cost to process a single invoice
  • Time to process a single invoice
  • Invoice exception rate
  • Suppliers that submit invoices electronically
  • Invoices processed straight through
  • Invoices linked to purchase orders

Let’s look at how average companies compare to best-in-class companies when it comes to these KPIs.

Each year since 2006, Ardent Partners has tracked this information in its State of ePayables report. In the 2019 report, the company found that it costs the average company $10.08 to process an invoice. This is an all-inclusive cost. While this figure is down from 2006’s $24 per invoice, it is well above the $2.18 cost per invoice that best-in-class firms are achieving.

The average time to process an invoice is 8.3 days, but best-in-class firms only need 2.9 days to process an invoice. Many companies are still experiencing significant bottlenecks when processing invoices. Lengthy approval times are one reason it takes most firms so long to get an invoice processed.

The invoice exception rate is 22.6% for the average firm, but only 10.1% for best-in-class businesses. Coding errors, missing information and lack of purchase order are the main reasons for exceptions, according to Ardent Partners.

Best-in-class firms are processing 65.3% of their invoices straight through while for the average company that number is 24.2%. When it comes to getting suppliers to submit invoices electronically, that happens 49% of the time for best-in-class companies and only 24.9% for the average business.

In nearly 80% of the cases an invoice is linked to a purchase order in best-in-class companies. For the average firm, that number is 50.3%.

So, what’s the difference between the top performers — Ardent Partners defines them as the 20% of businesses with the lowest average invoice processing costs and shortest invoice processing time — and the average company?

The best-in-class companies have leveraged technology to streamline their operations and become more efficient.

“A best-in-class AP program represents perhaps the ‘blueprint’ for the function moving forward. These operations blend sharp operational consistency, standardized capabilities, a reliance on core technology, and most importantly, lead with an intelligence-first approach to harnessing AP data and insights,” the report says.

Maybe it is time you started looking into becoming the best-in-class when it comes to your AP processes.

About the Author

Bill McCouch | Senior Vice President of Procurement Services

Bill McCouch, Senior Vice President of Procurement Services at Corcentric, has been with the company since 2001. Bill brings more than 40 years of transportation industry experience to Corcentric. In this role, Bill oversees all sales, operational, and financial planning activities for Corcentric’s procurement solutions. Previous to joining Corcentric, Bill’s experience included serving as Operations Director for two web-based transportation startups and 18 years with Ryder System, Inc., where he oversaw the development of company-wide strategic sourcing programs, staffing, infrastructure, and a nationwide distribution system for OE and aftermarket parts procurement.

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