The current economic climate is forcing companies to pursue lean operations as strongly as ever. It’s a message that we hear at SunGard, and that you may hear from your employer as well. Lean operations are driven by the understanding that only the most efficient organizations survive.
The latest issue of Financial Operations Matters, published by the Institute of Financial Operations contained the article, ”Are you ready for lean A/P? 4 Trends to watch in 2012.” As the article highlights, lean A/P is the outcome of analyzing existing business processes, uncovering inefficiencies, redefining processes and applying technology where appropriate to support automated processing. Best practices at companies with the lowest A/P costs typically include: a high degree of automation, end-to-end integration of A/P with purchasing, movement to electronic payments, embracing a self-service model for suppliers, and maximizing revenue from card rebate programs.
I concur with the points outlined in this article. As today’s business culture evolves and companies seek to emulate the success of best practice organizations, 2012 will see a continued push toward leaner operations and the following trends emerging.
- Automation will continue to grow. Regardless of the many advantages of automation such as shortened processing cycles, reduced lost spend, elimination of duplicate payments, and reduced time spent on rectifying issues, the rocky economy has made it increasingly more difficult for senior management to justify the capital expenditures historically required for an automation project. However, given the growing availability of Software-as-a-Service (SaaS) based solutions, automation will not only continue to grow, but it should be easier for organizations to justify the move to automation.
- SaaS Solutions will become ever more attractive. SaaS solutions eliminate the initial license fees and ongoing IT costs associated with installing and running software on-site. These low entry costs will helpjustify the business case for automation at a time when there is a reduced appetite for projects requiring large capital expenditures.
- Shrinking A/P departments. The relentless shift towards automated processing and touchless A/P processes continue to reduce the need for traditional A/P professionals for whom a large part of their job is entering data, cross-checking purchase orders, and processing payments. The focus is shifting to analysis and exception handling which require higher level problem solving skills. This will create opportunities for those with analytical and processing skills. These higher skilled A/P professionals will continue to be in high demand.
- Push toward self-service solutions. According to the article, at Home Depot, “80% of supplier inquiries can be handled via the [vendor] portal with payment inquiries as the number one call driver to [their A/P] help desk.” Full featured vendor portals allow suppliers to perform their own queries, obtain payment details, and deliver remittance information in electronic format for input to accounts receivables systems. Expect to see more automated feeds of payment and remittance information as the push continues to achieve straight-through-processing.
- From cost center to revenue center. As companies struggle with increased competition, lower margins, and restricted revenues, card rebate programs will be readily embraced. A/P professionals will distinguish themselves by implementing A/P card programs that generate revenue, and will use this revenue to fund additional automation projects.
How lean is your A/P department? Are you doing more with less? Are your automation efforts proactive or reactive? Are your A/P plans for 2012 in line with trends mentioned here? I’d like to hear from you.