Blog | June 7, 2017 | by Kate Freer

If Time is Money…What is the Real Cost of Your Transaction Processing?

Measuring the cost of your AP and AR processes is more than just a matter of dollars and cents…it’s also a matter of time. See how much time your transaction processes are costing your business.

Measuring the cost of your AP and AR processes is more than just a matter of dollars and cents…it’s also a matter of time.

When it comes to today’s global business environment, the tortoise and the hare fable is no longer applicable. “Slow and steady” doesn’t win the race…it just gets left behind. Staying ahead in that race to profitability and productivity relies on using technology, which is constantly evolving. This reality has left CFOs in a position where, although they play many roles, a primary responsibility is overseeing and controlling spend and managing the organization’s working capital. And that necessitates streamlining, digitizing, standardizing, and automating many of the finance functions, especially accounts payable and accounts receivable.

Maximizing time and talent

CFO publishes a monthly article based on metrics released by APQC research. May’s article, “Metric of the Month: Transaction Processing,” reveals the inordinate amount of labor and time spent on the steps within the transaction process. In their survey of 1,594 companies, APQC found that while top-performing companies spend 30 percent of their time on transaction processing, laggards (those at the bottom) spend approximately 56 percent of their time on the same tasks.

The article notes, “For years, CFOs have talked about the importance of moving finance out of the transaction-processing business and towards a more strategic role.” Companies often have a reservoir of talent within their finance sectors; talent that could work with data and analytics to help improve performance and achieve company goals. But spending time opening envelopes, keying in invoices, tracking approvals, and answering phone calls from suppliers looking for payment doesn’t leave much time for things like analytics and strategy. The key is to transform these time-consuming processes, to eliminate inefficiencies and thereby reduce costs.

Transforming processes, step by step:

  • Process standardization – Companies first need to map their existing processes in order to identify bottlenecks and redundancies, as well as which employees may require additional training. They also need to look throughout their organization to identify disparate finance data and systems and standardize those as well; seeking out holistic P2P solutions that can easily integrate with the company’s ERP system.
  • Process benchmarking – Once the problems have been identified, it’s essential that management create benchmarks to measure finance’s performance and progress. This means identifying reductions in time and cost realized through the steps taken and solutions implemented. This will also identify issues that are not improving and therefore indicate deeper problems that need to be addressed sooner rather than later.
  • Process improvement – If you limit yourself to simply standardizing processes while maintaining the manual component, you will not realize significant improvements. In order to substantially improve processes, a company would need to digitize and automate them. But just adopting any automated solution will not provide maximum benefits. Companies should look for a cloud-based solution, on either the AP or AR side, that provides real-time visibility into all transaction data and invoice and payment status. The solution should also include a robust analytics and data capture capability.

Calculate the savings in time

If you question how much savings can be realized through digitization and automation, the APQC research offers a stunning statistic. Just in the AR function alone, top performing organizations revealed that they receive 93 percent of their payments electronically or automatically. This enables these organizations to process $1 billion in AR revenue with only two employees, while low performers needed ten employees for the same task.

Assuming that those additional eight employees are valued, talented people, imagine what they can contribute in terms of better forecasting, performance analytics, and providing the data necessary for finance executives to gain greater control over spend management and working capital.