AP Control Panel: Do you know where the money goes?

One of the things the accounts payable department ought to know — and should be able to report on dynamically — is spend. After all, AP issues an organization’s payments. Aside from payroll, virtually all outgoing cash passes through its hands.

Our recent AP Control Panel, conducted in partnership with the Institute of Finance and Management (IOFM), checked in with more than 300 accounts payable professionals to see just how much transparency they have when it comes to:

  • Per-supplier spend in real time
  • Enterprise spend in real time

Given that visibility into these key metrics is essential to procurement, treasury, and the organization as a whole, it’s logical to assume that respondents with significant levels of accounts payable automation would find this particularly easy.

But is that true? Let’s see what the numbers show.

Per-supplier spend

Many organizations negotiate discount terms based on spend volume with their vendors. Knowing if they’ve met that threshold, or even exceeded it, can help procurement manage the best possible discounts.

Further, individual departments within larger organizations may each be buying from the same vendor without the knowledge of procurement. Those purchases aren’t being aggregated to obtain the greatest discounts from the combined spend. AP is likely the only department that can shed light on this, but accurate per-supplier reporting is required to do so.

And for organizations concerned about relying too heavily on a single supplier, this data can also ensure the spend is distributed more evenly among vendors for the same product or service.

Let’s first look at how transparent spend by supplier is for the total pool of survey respondents.

Here we see two-thirds of respondents can indeed track their spending by supplier in real time. This is good news, but let’s see how that breaks out when we factor in their level of AP automation.

For our purposes, respondents’ level of automation is determined by what percentage of invoices they can process without manual intervention:

  • Significant automation: 70 percent or more straight-through processing
  • Moderate automation: 21 to 69 percent straight-through processing
  • Limited automation: 20 percent or less straight-through processing

Here’s how per-supplier spend transparency breaks down by degree of automation.

Not surprisingly, those AP professionals with significant automation were the best positioned to track per-supplier spend in real time — although nearly a quarter of highly automated respondents still couldn’t. Those with moderate or limited automation were even less likely to be able to acquire this information in real time, with more than a third of them unable to do so.

Enterprise spend

Being able to track enterprise spend in real time and report it up the chain to treasury is key to an organization’s ability to manage its cash flow and working capital. Without insight into this key metric, an organization will find accurate financial reporting and accruals extremely difficult.

This can be highly risky, both in terms of incorrect reporting to shareholders and the board, as well as opening up the organization to compliance violations and jeopardizing vendors’ willingness to extend credit based on financial data.

Here are the enterprise spend survey results for the aggregate pool of respondents.

As we can see, just slightly more than half of participants can track and report enterprise spend in real time – a rather alarming statistic. This begs the question: Does automation have an impact here?

The graph below reveals the answer.

Clearly, here’s one of the places where AP automation makes a huge difference – it provides visibility into the overall financial status of the enterprise. Almost all of the survey respondents with significant AP automation can track enterprise spend in real time, whereas fewer than half of respondents with moderate or limited automation can.

The big picture

This analysis tells us a few useful things:

  • If you have significant accounts payable automation, you have better insight into spend of both types.
  • However, significant automation affords better insight into enterprise spend than it does into per-supplier spend.
  • Conversely, those with moderate or limited automation can track per-supplier data better than they can track enterprise data.

More automation is undoubtedly better when it comes to real-time supplier spend visibility, but where it really shines is with enterprise spend. Based on these metrics, it seems reasonable to assume that less sophisticated automation is more AP practice-focused, since it does a better job with supplier reporting than with providing broader organization-wide insight.

Take action

If you already have an automation solution but struggle with supplier spend reporting, make a case for the benefits that procurement can reap with more information: Better discounts, control of maverick spending, and restricting over-reliance on specific vendors.

On the other hand, if your challenge lies with enterprise-spend reporting, remind treasury and upper management that the information that paints the correct picture of the financial health of the company resides within AP. Better reporting can ensure accurate financial statements, reduced risk of compliance violations and the associated fines, better accruals and greater appeal to potential investors and vendors.

If your accounts payable automation isn’t capable of providing you with the business intelligence you require for full transparency, it’s time to look for a more powerful solution. It’s time get more from your automation, providing the best real-time picture of per-supplier and organizational spend.

Ready to learn more? Check out the AP Control Panel.

Otherwise, you just might wonder where all the money went.

The Institute of Finance and Management (IOFM) was founded in 1982 and since then, its mission has been, and continues to be, to align the resources, events, certifications, and networking opportunities it offers with what companies need from the accounting and finance functions to deliver market leadership.
The Institute of Finance and Management

The Institute of Finance and Management

The Institute of Finance and Management (IOFM) was founded in 1982 and since then, its mission has been, and continues to be, to align the resources, events, certifications, and networking... read more about: The Institute of Finance and Management