SHOWS SENIOR MANAGEMENT THE MONEY: PART 5 OF 5 – POTENTIAL SAVINGS OPPORTUNITIES
STEP 5: CALCULATING SAVINGS OPPORTUNITIES
Any winning proposal for AP automation needs to have a detailed calculation of savings opportunities so that stakeholders and decision makers can be absolutely sure of the way ahead. Some of the data that can be used for arriving at this calculation are:
- Average cost to process an invoice (annual cost per FTE + overhead / number of invoices)
- Total annual invoiced spend
- Early-payment discounts captured as a percentage of spend
- Invoice processing cycle time
- Percentage of invoices received as paper or e-mail PDFs, scanned images, OCR, electronically.
- Number of invoices currently received per year
- Days Payable Outstanding (DPO)
- Projected cost per invoice
- Projected process cost savings
- Projected early-payment discount savings
- Projected total annual savings
The above stated data in combination with other relevant data provides a clear picture of the AP department’s current baseline, the potential process savings from deploying a supplier, the potential impact of deploying a supplier portal on accounts payable staff (including costs and productivity), and other potential savings and benefits, including improvements in early-payment discounts captured, cycle times, and DPO.
These potential savings calculations will create a compelling business case for deploying a supplier portal.
However, when you are evaluating vendors who can deploy supplier portals, it is paramount that companies should seek out the expertise and experiences of other organizations that have deployed the technology. One should find out the lessons learned in building a business case, winning project approval, evaluating solutions, selecting a vendor, managing change, and on-boarding suppliers. It is critical to understand what worked well and what did not. One question that you should ask the peers is what they would have done differently if they had to go through the process of selecting and deploying an AP automation vendor all over again.
Organizations should use these insights from the experiences of their peers to validate the assumptions in their business case, refine their project plan to create a robust business case that will win over decision makers and key stakeholders.
The step-by-step strategy outlined in this blog series is a blueprint for creating a compelling business case for deploying a supplier portal and thus enables you to win senior management approval for AP automation!