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