Accounts Payable: the case for automation and offshoring
Posted by email@example.com on July 3, 2018
The Australian Benchmark Initiative, the leading Finance benchmark and better practice study in the region, with 100+ participants has from its inception in 2011 highlighted a strong embrace of Shared Services (Accounts Payable: 84% in 2011 / 89% in 2017). The study provides a good cross section of local industry, with participants having a median headcount of around 1200 and revenue of $800 million. The study reveals that on a global scale, Accounts Payable teams are relatively small, with a median headcount of 6, but at a high median cost of $62,500 ($81,250 including on-costs) per full time equivalent (FTE).
Source: Australian Benchmark Initiative (www.australianbenchmarks.com), 2017
It would be natural to think that the high cost the Accounts Payable function would provide a perfect storm for automation and offshoring. While the benchmark data reveals an increase in outsourcing / offshoring from 0% in 2011 to 17% in 2017, automation has barely turned the dial from 23% in 2011 to 24% in 2017. The big question is, why aren’t Australian companies embracing these opportunities? Part of this comes down to the relative size of the teams Australian businesses are managing. While the median Accounts Payable team in the benchmark data is 6, this quickly reduces to 3 for the bottom quartile. The business case question rapidly becomes one of “if we can only save one resource, is it worth the effort / risk”?
The answer of course is for organisations to take a step up from a siloed functional view, and consider the broader context. While point solutions for Accounts Payable processing may not have historically got traction, new approaches to robotic process automation are allowing organisations to conduct rapid projects that are able to address multiple cross-functional pain points. Considering automation as a process improvement opportunity enabled by technology, rather than a technology solution in itself will go a long way to re-framing the problem.
While many will advertise the advent of automation as the death knell for outsourcing, nothing could be further from the truth. The offshoring market continues to evolve, and is an important consideration in the resource efficiency mix. In the case of Australia, the typical cost savings achievable are 70% which is compelling for any Finance professional, and merits further consideration as part of the transformation program.
What should you do to achieve such cost savings? The first step is to conduct a strategic review of core process areas, and to build a business case that considers each step. The following provides an example business case based on a total invoice volume of 37.440 per annum, mapping out the benefits at each step in the transformation journey against the benchmark metrics.
So, while the comment “if we only reduce a headcount of one it isn’t worth the effort” might be an effortless way to stop conversation at the water cooler, a well thought out strategic review that combines process improvement, with automation, and offshoring, can result in significant benefits. While only Accounts Payable has been provided as an example, this logic and thinking can be readily extended to all other parts of the organisation.
So, that only leaves the question - what are you waiting for, the opportunity is there to make yourself a Rockstar?
About the author: Jamie McBrien is a Director optim2 a consulting firm focused on improving finance and back office functions, and optiBPO a business that helps clients plan, build and manage offshore teams in the Philippines. Also being one of the authors of the Australian Benchmark Initiative, he has unique context on process improvement, automation and offshoring.
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