Tuesday I was speaking to a group in Boston… they asked me to talked fast because there was a snow storm on the way. You know I was very conflicted because I thought that people in Boston were used to the snow… even liked it. Then it was explained to me that the panic was due to the fact that traffic was going to be terrible, so they were more nervous of being in traffic than snow… I can understand that.
When I talked with groups I want to make sure that they understand the purpose of Accounts Payable Automation… Time. I don’t try to be too dramatic, but I want them to know that automation is only as good as the time that is freed up. I also want them to know that an automation service provider should be judged on the amount of time they are able to free up, and that service provider should be held accountable for delivering on the amount of time they can free up.
Once you buy into the idea that automaton is only as good as the time it frees up, there are two types of time, I won’t go into them too much, but you can read an article I wrote about them by clicking this link To give you the short version, there are soft dollar time savings and hard dollar time savings. The difference between the two are soft time savings is that time that Accounts Payable Automation impacts but does not completely eliminate. The example I always use is coding and approving. With paper you code and approve and when you are automated you will code and approve. Hard time savings, on the other hand, are those tasks that automation eliminates 100%. .
Using the idea of hard time savings, there is a very interesting benchmark within your process that you are able to use, and it is one of the biggest pools of labor that can be eliminated from manual work which is entering invoices into the accounting system. Most AP Automation service providers are able to transfer invoices from their system to your accounting system without you doing anything. Note that if the service provider is unable to do this, you may want to look somewhere else. (Back to the 1500). I have found that, and this is based on thousands of AP cost per invoice studies, that for every 1500 invoices that your process every month it take 1 full-time, 40 hour a week person to do data entry into the accounting system.
Think of This
This number can work multiple ways. Frist it can tell you how many invoices per month you process, which is a fact that seems to go without notice for most accounting departments. Second, if you are doing more or less than the 1500 you can use the number as a benchmark against other companies to judge how efficient your AP group is. Third it can give you a quick measurement on the impact of AP Automation. What I mean by that is if you process 3000 invoices a month an immediate impact with automation is you will have an additional 80 per week that you can use for other tasks. Be warned those 80 hours may be spread out over 6 people, but at least you can know the impact.
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