Former CFO, FAO metrics guru, and FAO provider Chris Gattenio of IBM has been an advisor for more than 1,000 CFOs. This month, she explores how some companies are successfully transforming AP.

by Chris Gattenio

Q:  How are leading-edge companies transforming their accounts payable processes through outsourcing?

A: In a successful accounts payable (AP) outsourcing environment, effective process excellence can be realized in a variety of ways. Leading-edge companies that make use of an experienced outsourcing partner can bring unmatched, consultative expertise to their organization that will drive improved process and policy execution, as well as measurable cost reductions.

For many organizations, the financial settlement cycle can be overwhelming. It is often a manual process with several human touch points and requires cumbersome management of paper files that need to be linked back to transactions. Despite IT investments in powerful, leading-edge systems for transaction processing, gaps still exist in tracking, accessing, and updating data.

Facing mandates such as Sarbanes-Oxley, many employees become bogged down with the need to comply with company policies. With the ever-growing need to avoid these compliance issues, organizations in nearly every industry are searching for opportunities to improve compliance.

Although organizations seek to reduce costs and improve efficiencies by mitigating the process, technology, and organizational complexity, it is equally important to achieve strategic and financial growth. Today’s corporations face a number of business problems associated with AP:

• Variations in processes;

• Fragmentation of processes across the businesses;

• Staggered ERP deployment schedules;

• Locally developed applications;

• Rate and pace of partnering by geography;

• Varied executive support for process excellence re-engineering; and

• Varying levels of global capability.

Clarifying and quantifying AP objectives and measurements for success are key to assisting in building a business case, understanding the return on investment, identifying opportunities for process and policy transformation, and garnering the right level of constituency and executive support for funding approval. Effective solution providers will:

• Reduce errors and processing costs: The financial settlement cycle encompasses the related activities of delivering a purchase order to a supplier and processing the invoice and payment of a B2B transaction. Through automation, the average Fortune 2000 organization can achieve new levels of efficiency, improve use of payables-related working capital, and increase compliance.

• Capture early payment discounts: According to the Aberdeen Group, 70 percent of negotiated discounts are never realized. This means buyers are paying too much for their goods and services, and suppliers are not getting timely access to the cash they need. Paper-based processing of invoices and payments often means extensive business settlement cycle times. Electronic PO delivery, invoicing, and payments dramatically compress the cycle.

• Improve payment performance: Settling accounts rapidly conveys a number of benefits, including relieving check processing and handling efforts, reducing duplicate invoices and payments, and more effectively resolving disputes, by far the most costly process stage.

A strong AP outsourcing provider will address various challenges hindering accounts payable optimization, bringing process management expertise, state-of-the-art processes, technology, and talented staff with a strong track record of implementing and executing proven solutions that work around the globe.

The benefits and results for AP outsourcing projects are both powerful and varied. In addition to substantial cost savings, significant strategic, transformational, and financial benefits can be achieved through process improvements in invoice receipt, reconciliation, and disbursement activities by enabling industry best practices and processes through a provider’s asset-based “wrap-around” technology and an extensive network of e-enabled suppliers.

Significant reductions in processing costs and cash flow are typical. Leading edge companies that make use of an experienced outsourcing partner discover the largest results with a solution that drives total business transformation—in people, process, and technology.

Organizations seeking to optimize their AP solutions should ensure that they select a strong partner that offers services and solutions that integrate and manage customer-facing processes, including supplier maintenance, supplier network, invoice receipt, pre-process validation, processing, reporting, and payment processing.