businessBusiness Coachingbusiness growthconsultantERPFinanceProcess Improvementsmall-businessHow to Measure The Efficiency Of Your Invoice Automation Project

October 18, 2021by amybabashoff0
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Automated business systems are implemented to effectively streamline operations, speeding them up while simultaneously providing real time measures and progress. 

As the digital revolution continues to advance and accelerate how we conduct business, manual efforts have gradually become our worst enemy. For those companies still relying on paying their suppliers manually, their inefficient practices continue to risk their competitive position in today’s increasingly developing market.

Ranging from user-friendly electronic invoicing solutions to cognitive invoicing tools that parse supplier invoices directly into the buyer’s ERP system, different processes are better fit for different companies. 

While invoice automation can be achieved using a number of alternative solutions, the ultimate goal seeks to shift the mundane paper invoice processes into efficient, electronic structures. By implementing this, businesses can accelerate the invoice handling process, mitigating the risk of error while cutting costs.

Measuring Improvement

If you inadvertently neglect to measure operational performance, in this case – invoice automation – you are refusing your ability to effectively analyze and manage it. Our team of business experts here at MCDA CCG often see companies decide to implement an invoice automation program and call it a day. 

We’re going to tell you why this does not work. In order to maximize the value of an invoice automation enterprise, it’s important to set attainable milestones and goals for the level of automation the organization is striving for – and then measure the progress made over time.

It’s important to note that the level of automation and working results will vary between companies. However, whatever the company’s running target may be, two distinct key performance indicators (KPIs) can directly illustrate the level of automation achieved:

  1. The percentage of invoices converted from paper to an electronic format.
  2. The percentage of invoices that are both electronic and processed “straight through” 

By combining and utilizing these two KPIs, you can provide your company with a clear image of the level of invoice automation they have achieved.

Two Is Better Than One

Once again, our MCDA CCG team will often find that companies will only look at one of the two metrics listed above – but it is important to measure progress in both of these areas.

If companies solely focus on the first metric, they will inevitably overlook the importance of integration. In an invoice automation enterprise, companies must observe whether or not that the integration between the buyer and the electronic documents being used is working seamlessly. Think of it this way, if you automate 85 percent of your invoices, but all of them still require manual interference, the company will not see adequate ROI. 

On the flip side, companies may instead focus on the second KPI and bypass 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 for your suppliers. When we are faced with complicated channels, we are less likely to continue on.

Companies implementing an invoice automation program should utilize a balanced approach, aiming to review both KPI’s at least every six months, and adapting as necessary. Keep reading for some useful tips: 

First KPI:

  • Regular communication both within the organization and externally – we want frequency and transparency
  • Consistent messaging across various levels and externally.

Second KPI:

  • 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.

Driving Momentum

Once KPIs are being measured, companies will also need to take steps to address any weaker areas. 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. 

Final Thoughts

Whatever the chosen approach, companies that measure the two KPIs and use them to drive further improvements will solidify their market position and best equip them to reach their desired outcomes. The higher the level of automation achieved, the better placed companies will be to optimize their processes while increasing their working efficiency. 

Additionally, a successful invoice automation installment will accelerate the outdated manners  in approving 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.

Companies seeking to automate their invoice processes should know that they can expect significant ROI when completed and maintained in a proper manner. 

As mentioned above, it’s not enough to implement an automated invoice process and consider the job done. If you embark on this modern-day enterprise it’s imperative that you do so with a strategic plan – to reduce costs, leverage the latest technologies, smooth the transition, and constantly measure.

Remember that these automation programs are never static, a constantly changing market means core processes need regular attention.

MCDA CCG, INC. consultants help our clients through all stages of their automation implementation, supporting them throughout this unfamiliar process while assuring no efforts are not going to waste.

See how our team of business advisors can help you by calling our office  – headquartered in Placentia, Orange County, California – today. In a quick, no obligation call, you will learn more about how automating your day-to-day processes will future proof your business by leveraging the latest technology to increase accuracy and save time.

 

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