Lies, damn lies and AP automation metrics

Lies, damn lies and AP automation metrics

Posted by Pete Loughlin in AP Automation 13 Mar 2012

It’s ironic. The very statistics that show the compelling case for AP automation also show that AP automation is the last thing a business needs to be planning.

Today at Kofax Transform 2012, Scott Pezza from Aberdeen (@scottpezza) presented a comprehensive set of numbers illustrating the compelling case for automation of Accounts Payable. One metric after another showed that best in class organizations stand head and shoulders above even average businesses in terms of benefits they derive from initiatives like e-invoicing and scan and capture. But as I listened to Scott’s eloquent presentation, something nagged at me.

Purchasing Insight logoThe best performing organizations score highly when we look at their levels of standardization, their internal controls, their use of technology, incentives and KPIs but when you look at the laggards, there is very little difference between them and the “average” organization. What does that tell us?

There are two ways to interpret these numbers. Firstly, that organizations should aspire to mimic the attributes of the best in class in order to gain the impressive benefits that they can demonstrate. That’s fairly obvious. Less obvious – and regrettably I have to report that this is closer to real world interpretation – why bother doing anything at all?

If you are an average organization you could a) invest in becoming best in class and reduce the cost of just about everything or b) stop investing in AP good practice completely and lose very little in terms of performance. After all, there is very little difference between the laggards and the average. There is little to be lost from under investing in AP.

This is the wrong interpretation. In fact, the statistics give a clue a to what is actually a quantum leap in business best practice. What the Aberdeen statistics appear to be saying is that there is a range of poor practice but if you implement best practice, there’s no incremental business improvement – there’s a leap.

For any organization thinking that it’s OK to under invest in AP, imagine that you are a retailer in the 1990s. You’re a good retailer. You could, if you wanted to, save some money and be a bad retailer. You have a choice about investing in on-line retailing. Do you a) embrace e-commerce, b) do nothing, c) save some salaries and become a bad retailer. (What you save in salaries may be more than what you lose in sales.)

We know now that options b) and c) are the same – commercial suicide! E-commerce didn’t deliver an incremental improvement it was a quantum leap and for the same reasons businesses that are serious about sustainable cost reduction need to grab the AP automation opportunity with both hands.

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