Ariba Knowledge Nuggets

 

The invoice to payment cycle is typically the most laborious, time-consuming, and error-prone process in the cash management cycle.

 

  • Majority of invoices are paper with no consistent format
  • Manual workflow process and rules for invoice approval, differing by invoice type, supplier, goods or services and countless other factors
  • Ongoing challenge for AP to manage suppliers and resolve discrepancies without have ownership of the original order

 

 

For the Median Organization this can translate to $2 to $3 million in End-to-EndProcess Cost Savings

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The Hackett Group Procurement and Accounts Payable Benchmarks, 2008

 

MessyDesk.jpgRelying on paper-based processes to handle inbound invoices drives up costs in more ways than one. Think about all the time and resources your AP team spends manually inputting invoice information, validating and matching invoices with purchase orders, handling supplier inquiries, and dealing with blocked invoices from ERP systems.

 

 

 

 

 

 

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  1. While process cost reduction is important so are improvements to cycle time and effectiveness
  2. World-Class organizations process transactions significantly faster than others and have much higher rates of success when it comes to matching invoices and paying vendors on time
  3. The advantage of being more productive at transactional activities goes beyond just process cost savings through FTE/Full Time Employee reductions.  It allows world-class organizations to reallocate resources to higher ROI type activities and take advantage of things like early pay discount

 

 

Why should we care about best practices in AP?

     For the same reason legendary bank robber Willy Sutton targeted banks: It’s where the money is. As the department in charge of all disbursements (except payroll), AP is the gatekeeper of the organization’s funds. Without AP best practices, there’s a risk of "leakage" of those funds—through duplicate or erroneous payments, missed invoice discounts, late-payment penalties, misuse of funds, and outright fraud. This represents very hard dollars that come right out of the organization’s bottom line. Plus, there is the productivity issue. Best practices help an AP department to be more efficient, allowing it to do more with less. And then there are tax and regulatory issues. Everyone’s nightmare is to have the Internal Revenue Service or state auditor come knocking on the door due to inadvertent noncompliance with federal tax, state sales and use tax, unclaimed property, or other regulatory requirement. Last, but not least, the Sarbanes-Oxley Act has put increased pressure on AP to tighten up internal controls.

     So whether it’s handling invoices, payments, master vendor file issues, employee expense reimbursements, p-cards, cash management, technology issues, regulatory requirements, organizational strategies, or staff relations, this guide can help you build a coherent set of best practices that are tailor-made for your AP department.

 

Source:

IOMA’s Complete Guide to AP Best Practices

 

 

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