How can adopting accounts payable best practices help your organization process daily accounting information in a quarter of the time and at nearly 80% less cost than your competitors? You can find out how accounts payable best practices can cut costs in 9 Proven Ways To Dramatically Reduce Accounting Costs (Up To 78%) With An Enterprise Content Management System.
Broad Survey Reveals Accounts Payable Best Practices
A survey by the Aberdeen Group suggests that most accounting departments could save significant amounts of time and money by embracing accounts payable best practices. The Aberdeen Group surveyed more than 180 organizations to assess the performance of financial operations.
The gap between the top 20 percent of those surveyed and the bottom 30 percent is remarkable:
AP processes at best-in-class organizations (top 20 percent)
AP processes at laggard organizations (bottom 30 percent)
|4.1 days to process an invoice*||16.3 days to process an invoice|
|$3.34 to process an invoice**||$16.67 to process an invoice|
|Capture 90% of early payment discounts***||Capture 18% of early payment discounts|
Even Small Improvements Add Up
Think about this: A medium-size company might have an annual purchasing volume of $10 million. If the company could shave off just one percent of that cost by adopting accounts payable best practices, that one percent adds up to $100,000 every year. This increased efficiency goes beyond cost savings. It can also allow you to reallocate more of your resources toward revenue generation.
In fact, using an automated, electronic solution, one best-in-class company was able to:
- Reassign 7 full-time employees from data entry to more productive work, and
- Reduce costs by $1 million in 3 years
One Way Companies Improve Their Efficiency
One proven way the “best-in-class” organizations are able to process their accounting documentation so efficiently is by using a centralized digital repository for their information.
There are two advantages to this approach:
- Because all the relevant information is in one centralized location, those tasked with reviewing the documentation can quickly obtain the needed information to verify vendor bills and keep the approval process moving forward. This makes the organization eligible for early payment discounts, saving as much as 2% to 3%.
- The centralized approach reduces the temptation to wave invoices through because it’s too time-consuming to check them for accuracy. Instead of hunting down the purchase requisition and price list and checking the invoice against them, far too many companies simply rely on their vendors to be honest and accurate. The result is the risk of overpaying. The centralized system provides approvers more confidence when they sign off on an invoice because it’s easy to answer any questions by looking up the request, purchase order or shipping confirmation in just seconds.
Read about 8 other proven methods the best-in-class companies are using to get more done in less time at a significantly lower cost by downloading your free report, 9 Accounting Improvements that Drive Best-in-Class Performance.
Editor's note: This post was originally published in September 2015 and has been updated for accuracy and comprehensiveness.