There is a lot of confusion when it comes to automating Accounts Payable. In a recent survey of a small group of CFOs, the question was asked… “What is your current cost per invoice?”. The overwhelming answer was… “I don’t know”. That is an interesting response. Think on the dynamics of an answer like “I don’t know”. The cost per invoice question is a financial question to financial leaders regarding (what I like to call) a spreadsheet number… a spreadsheet number is a finite, black and white, number that is in a box… literally… meaning there is no gray area. In my experience, Accounts Payable has been a necessary evil throughout history. The practice of getting expenses approved and paid has been forgotten as an area of improvement. To be clear – AP to a CFO is an expense with no ability to change. To be fair to the CFOs, the ability to change AP is new… automation has only recently become an adopted norm within the middle and smaller markets. This introduction of new technology and business practices has created a tremendous amount of confusion. It has also introduced a small, concentrated storm within corporate accounting (more on the storm later).
Once asking (of CFOs) “What is your current cost per invoice?”… and getting the answer “I don’t know.” , the survey went on to ask the participants to guess. The answer came back between $1 – $3 dollars (another blog for another time – the average is $22). Then, to get more insight, the survey asked “Is there any pain in AP?” The CFO’s answered… “No.” Contrast this response with the response of someone who may be closer to the AP action (yes there is a such thing as AP action) and the answer a quite different. Directors of AP and/or Controllers are usually in the middle of these questions. When asked what their cost per invoice is the answer is usually, “I don’t know, but I am sure it is large.” When I ask this question in person, I get a physical reaction with body language that says “I don’t really want to know – but I know I should.” These are the people who know that automation will help and improve. I have had a lot of response to a post from a few weeks ago on “Highly Skilled People….” which commends a leader for recognising that their people haven’t been used to their full potential due to all the mundane tasks associated with AP.
That’s the set up… here is the storm… Middle management knows that improvement is needed, upper management doesn’t! (I could also add that upper may have other pressing things to worry about) When the middle tries to convince the upper to invest in improvement of AP, the message comes across like this… “JUST DO IT FOR THE CHILDREN“. Now… no professional, trained business person would go to upper management and say, “Just do it for the children!”, but that’s what it sounds like to the uppers. I coined this phrase to illustrate the basis of the argument and the outcome of the pitch. The middle will look at the pain and anguish that day-to-day AP people are going through (the overtime , endless hours with paper, doing more with less) and will want a better life for the people. Automation can improve lives, however in this day and age arguing life improvement only doesn’ t make a compelling argument to spend money. An upper will hear a case that automation will improve the lives of people mired in paper and say to themselves, “We all have it rough.”
That is why I write these very important words…. KNOW YOUR NUMBERS!!!!! Know your current Cost Per Invoice (CPI), know your New Time (time freed up by automation), and know your Cost Per Invoice Automated (CPIa). The 8 Pitfalls will help with this… and there is more to come on each of these numbers.
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For more information go to www.newwayap.com
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