Two Key KPIs to Measure Your Invoice Automation Program
Transforming procure-to-pay processes is an important goal for many corporations – not only as a means of optimizing efficiency and reducing costs, but also as a way of achieving business continuity during these challenging times.
The procure-to-pay process can be streamlined in a number of different ways, and one of the most important tools available is invoice automation. For many companies, the processes involved in paying suppliers are highly manual and inefficient – so there are plenty of opportunities to automate these processes. Solutions that can help companies achieve this range from user-friendly electronic invoicing solutions to cognitive invoicing tools that parse supplier invoices directly into the buyer’s ERP system.
While invoice automation can be achieved using a number of different solutions, the end goal is broadly the same: To increase the efficiency of invoice processing by replacing paper invoices with electronic formats. By doing so, companies can speed up the invoice handling process, mitigate the risk of error and reduce costs.
You can’t manage what you don’t measure, as the saying goes. Often, companies will simply implement an invoice automation program and consider the job done. But in reality, automation is not a one-time activity. In order to maximize the value of an invoice automation initiative, it’s important to set goals for the level of automation the company is aiming for – and then measure the progress made over time.
The level of automation that can be achieved will vary between organisations . But whatever the company’s target might be, there are two particular key performance indicators (KPIs) that can give a true picture of the level of automation achieved:
- The percentage of invoices converted from paper to an electronic format.
- The percentage of invoices that are both electronic and processed “straight through” (i.e. without the need for manual intervention).
While not exhaustive, together these two KPIs can give companies a clear picture of the level of invoice automation they have achieved.
Two KPIs are better than one
Often, companies only look at one of these two metrics – but in practice, it is important to measure progress in both of these areas.
If companies focus on the first metric, which measures the adoption of electronic formats, they will overlook the importance of integration. In an invoice automation project, companies need to ensure that the integration between the buyer and the electronic documents being used is working seamlessly, meaning that no one needs to touch those invoices manually. After all, if 80% of invoices are automated, but all of them still require manual intervention, the company will see little return on its investment.
In other cases, companies may focus on the second KPI while paying little attention to the first. If companies concentrate on achieving straight through processing without also optimizing the number of invoices converted to electronic formats, a complicated onboarding process may ensue. And if suppliers are confronted with a cumbersome onboarding exercise, they will be less likely to follow the new processes.
Companies embarking on an invoice automation program should therefore ensure that the measures they undertake to achieve both KPIs should have a balanced approach, and should aim to review them at least every six months, adapting as needed. Following are some useful tips:
- Regular communication both within the organization and externally – the more frequent and transparent the better.
- Consistent messaging across various levels and externally.
- Keep the process simple, don’t introduce additional checks that the process does not absolutely call for.
- Remember automation of processes does not introduce problems, it only highlights the bad processes/practices that have been embedded within a process. Fix the problem, not the symptom.
What’s more, when plotted over time, the graphs for both metrics should show ascending curves. If only one of the metrics shows improvement, the job has only been half done.
Once KPIs are being measured, companies will also need to take steps to address any areas where improvement is needed. When it comes to increasing the level of automation achieved, there are three key areas to look at:
- People. Is more training needed to ensure that people are following processes correctly?
- Processes. Are there opportunities to replace or improve existing processes?
- Technology. Can a higher level of integration be achieved?
Each of these three areas can have an impact on the company’s ability to improve the two KPIs. So by measuring, analyzing and improving these factors, companies will be able to build upon their initial success in invoice automation with further improvements.
In some cases, companies may choose to access external support in this journey. As such, Taulia offers a Health Check service, which helps companies review the level of automation they have achieved and identify opportunities for further improvements.
Reaping the rewards
Whatever the chosen approach, companies that measure the two KPIs and use them to drive further improvements will be best placed to reach their desired outcome. The greater the level of automation achieved, the better placed companies will be to maximize efficiency and increase the resilience of their P2P processes.
What’s more, a successful invoice automation initiative will speed up the time taken to approve supplier invoices – an important consideration for companies that offer suppliers early payment discounts via supply chain finance or dynamic discounting programs. After all, the sooner an invoice is approved, the sooner suppliers can take advantage of discount opportunities.