P2P/AP Benchmarking Report Reveals Electronic Invoicing Is Key To Performance

We’ve been taking a look at the very recent benchmarking report on global P2P organisations’ performance from APEX Analytix. As part of a series of best practice benchmarking reports it produces, APEX Analytix, a provider of solutions across the global financial supply chain, has surveyed Global 1000 companies across five continents about their P2P behaviour. They have asked questions about how they address supplier risk, operational performance, electronic invoicing and payments, and the alignment of AP and P2P within the strategic objectives of the business.

With 2018 fast approaching, it’s a good time to reflect on the gaps found in performance, areas for improvement and what the upcoming trends might be. We were interested particularly in intentions to invest more in automation (process robotics and machine learning), fraud prevention and risk management, and AP and P2P business alignment.

Some overarching findings show that in terms of invoice processing, average-performing P2P organisations process only 45% of invoices touchlessly, while for best in class, this figure increases to 99.8%. (By best in class they mean top-performing, that is upper-quartile or better P2P organisations, in terms of the number of regions they support, the proportion of incoming invoices processed electronically, the P2P controls in place, and so on.)

The report details the invoice submission methods available to suppliers, and the proportion of invoices handled electronically (both received and payed) and notes the variation between lower and upper quartile performers. The average P2P/ AP organisations pay 67% of invoices electronically. Again, upper quartile performers manage significantly better than this, paying 90% of invoices electronically.

In terms of supplier risk management: only 25% of businesses require sponsorship for new vendors; 15% don’t review high-risk vendors at all and only 6% review monthly and less than half (39%) review continuously. While a high number, 95%, of businesses have internal controls and a compliance function in place, less than half have invested in the more challenging payables controls (46% require a second signature on high-value cheques and 49% track refund cheques, surprisingly low, only 68% have a system in place to flag duplicate payments prior to payment release). The report lists out the risk management practices in place in more detail, but clearly supplier and payment risk mitigation still has room for improvement by many organisations, and there are a lot of missed opportunities for efficiency gains.

For the majority of P2P organisations, for example, a key opportunity lies in reduction of payment terms and conditions, and implementation of strong payment control practices. Almost three-quarters of businesses report formal efforts are under way to simplify supplier payment terms and maximise available cash discounts.

And, surprisingly, or maybe not, only 10% of organisations manage AP and P2P departments together. In almost half of businesses, the report finds, AP and P2P functions are totally separate functions under separate leadership.

The report lays out 10 key takeaways for P2P and AP functions, with the number one being: “Best performing P2P organizations have high levels of electronic invoice submission, touchless invoice processing, and electronic payments—in each case, at or close to 100%”

It anticipates a greater role for predictive analytics, cloud computing, and machine learning in helping P2P to add value to the broader business in the medium term. Robotic process automation is likely to be key, especially when allied to predictive analytics and machine learning in the longer term. And if we want to look further to the future, blockchain technology within the P2P process will effectively replace both invoices and ledgers.

Another useful and fact-filled report from APEX Analytix.

As Phil Beane, Senior Vice President, Global Field Operations sums up: “… the results share some very interesting revelations. We are definitely seeing the gap widening between the highest and lowest performing organizations. We know P2P departments are looking towards 2018 as a year that will see investment in technologies and automation, from supplier information management and working capital to fraud and robotic process automation. Another interesting insight is the shift towards unifying AP and P2P departments but there is still room for improved alignment; this collaboration should ease the implementation of best practices to bring organizations in line with the highest performing businesses.”

The whole report can be downloaded here.

As an aside, we found this little snippet interesting: that of CPOs interviewed, their reporting lines are fairly evenly split between the CEO (22%), the CFO (18%) and the VP Manufacturing Supply Chain (20%). A relatively small number report into the COO (10%), the CIO (5%) and the VP Corporate Services (2%). While 23% report into an entirely ‘other’ function. The question of who the CPO should report to is a rather interesting discussion, which we may well return to.


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