Accounts Payable Automation Survey. Mark Brousseau August 17, 2010

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1 Accounts Payable Automation Survey Mark Brousseau August 17, 2010

Services include: Service Group Business

2 Demographics US Bank, IAPP and APQC conducted a study on the level of automation for the disbursement activities within Accounts Payables Services include: Service Group Business Services/Consulting Construction Education Hospitality/Travel Software

3 Overview observations There is an increase in e-payments utilization and participants foresee the trend to continue The top challenges are consistent across industries, company size or job families: manual entry, issue resolution and routing Retail, Financial Services and Service organization anticipate more than doubling the use of ACH/EFT Organizations with $5 billion plus revenue are currently the highest users of ACH/EFT at 37% and predict growing to 59% while reducing paper check usage from 46% to 13% within 3 years Cost reduction is seen as the key benefit to migrate to e- payment methods Supplier and trading partner acceptance is seen as the key barrier

Overall Use of Electronic Payment Methods Increased in the Past Year ACH/EFT and p-card usage increased for 65% all participants 82% of Companies over $5 billion indicated increase in ACH/EFT

4 Overall Use of Electronic Payment Methods Increased in the Past Year ACH/EFT and p-card usage increased for 65% all participants 82% of Companies over $5 billion indicated increase in ACH/EFT utilization 64% of the organizations reported a decrease in paper check with75% of $5b+ companies reporting a decrease P-card utilization has increased for 50% of the companies with the biggest increases for the $250 million to $5 billion size companies Companies predict that this trend will continue over the next three years

5 Challenges In AP Three main challenges identified are Manual Data Entry, Routing for Approval and Resolving Errors Participants see The three main issues focus on the issues within AP of getting the data into the system correctly and managing the errors Cost is of concern Risk mitigation is of low concern

AP Challenges by Size Manual data entry is the top challenge regardless of size Size increases complexity and the ability to resolve errors and exceptions Organizations larger than $5

6 AP Challenges by Size Manual data entry is the top challenge regardless of size Size increases complexity and the ability to resolve errors and exceptions Organizations larger than $5 billion have less challenges with routing and with lost or missing invoices Key question is: What role does better tools, more standardized processes, better controls play in this result?

7 AP Challenges by Job Code Manual data entry and all the resulting issues are the major challenge for all job codes. Operational challenges such as: error resolution, and routing and missing invoices are more of a challenge to those closer to the day-to day activities Personnel costs account for a median of 67% of the total cost of AP costs 1. Lower manual entry supports lower cost, lower error rates, enhanced visibility into the data and better workflow control. 1 APQC Open Standards Research Data June 2010

Planned Increased Utilization of Automated Payment Methods Participants forecast an increased move toward automated payment methods over the next three years Participants Plan

8 Planned Increased Utilization of Automated Payment Methods Participants forecast an increased move toward automated payment methods over the next three years Participants Plan Doubling of ACH/EFT and P-card utilization over the next 3 years Paper check payment will be cut in half Wire continues to have less than 5% utilization to meet specific needs

Anticipated Percentage Change Retail, Financial Services and Service organization anticipate more than doubling the use of ACH/EFT Financial

9 Anticipated Percentage Change Retail, Financial Services and Service organization anticipate more than doubling the use of ACH/EFT Financial Services and Healthcare foresee nearly tripling p-card usage Manufacturing and Utilities/ Energy/ Communications forecast doubling P-card utilization

Payment Utilization by Size Companies with less than $250 million revenue anticipate doubling the use of e-payment methods Size drives adoption: $5 billion plus companies

10 Payment Utilization by Size Companies with less than $250 million revenue anticipate doubling the use of e-payment methods Size drives adoption: $5 billion plus companies are the furthest along and anticipate even greater utilization of e- payment methods over the next 3 years with a reduction to 15% use of paper check within the next 3 years

11 Benefits of Switching to Epayments Cost, supplier relations and improved productivity are key drivers to switch. Participants Reported Cost is the reported key driver to move to more electronic payments Wire transfer is utilized to meet specific supplier requirements P-cards increase the ability to take advantage of rebates From a recent AP 1 study higher productivity scores were correlated, at a statistically significant level, with higher levels of automation 1 APQC/IAPP/PRGX Economic Index Study 2010

Barriers to Increase E-payments The greatest barriers to implementation are perceived external barriers regarding the willingness and/or capability of suppliers and trading partners capability to

12 Barriers to Increase E-payments The greatest barriers to implementation are perceived external barriers regarding the willingness and/or capability of suppliers and trading partners capability to electronically handle automated payments. Over 75% of respondents believe that the majority of their suppliers currently receiving paper checks will be able to receive e-payments within three years The internal cost and/or capability to manage the transition to automated payments another major concern.

Key Barriers Over 50% of the Leadership sees the check systems as working well. What has been done to validate the assumption that trading partners are unable/unwilling to transition?

13 Key Barriers Over 50% of the Leadership sees the check systems as working well. What has been done to validate the assumption that trading partners are unable/unwilling to transition? APQC AP benchmarking results indicate higher levels of automation drives lower processing costs. Top Quartile costs are $4.26/invoice while the median is $ What is the annual savings opportunity for your organization? Do you have business case for change?

14 Barriers to implementation by size Supplier acceptance is seen as the biggest barrier regardless of organization size Cost and IT capability is less an issue for larger companies

increase) For companies under $250mm the adoption rate and plans to adopt are lowest -- yet,

15 EIPP Currently $1b+ organization have had a higher number of adopters The $250mm -$1b organizations have 12% current adoption levels but 38% have plans to adopt EIPP technology (3x increase) For companies under $250mm the adoption rate and plans to adopt are lowest -- yet, if the predictions hold, nearly 50% of this population will have adopted this technology within 3 years

16 Fraud Nearly 50% of the participants reported at least one fraud incident in the past year and paper checks had 10 times more incidents than ACH/EFT and wire fraud For the 44% who perceive fraud as a barrier, e-payment methods provide a more secure environment to help reduce the risk of fraud. Participants Reported Fraud exposure by paper check not only accounts for the highest number of incidents but also has a higher exposure than P-card to size of the fraud P-card fraud is typically employee misuse or abuse Larger companies report a lower percentage of P-card

Virtual/Cardless Utilization Virtual/cardless purchasing card accounts are utilized by 26% of the participants For companies with over $1b revenue the adoption rate is nearly

17 Virtual/Cardless Utilization Virtual/cardless purchasing card accounts are utilized by 26% of the participants For companies with over $1b revenue the adoption rate is nearly double For organizations with such accounts, ghost accounts are utilized twice as often as single use or preauthorized cards Condition % of people with P- card that use virtual PP

18 Usage by industry

is greater than the total respondent expectation Healthcare expects tripling the use of

19 Changes in Healthcare Utilization For Healthcare Healthcare current usage of e-payment is in alignment with all the participants Healthcare sees paper check usage reducing by 2/3 rd which is greater than the total respondent expectation Healthcare expects tripling the use of p-cards while others expect a doubling. What is driving the higher use of p- cards within healthcare?

Manufacturing For Manufacturing Manufacturing has the highest utilization of ACH/EFT (30%) The respondents predict halving the use of paper check

20 Manufacturing For Manufacturing Manufacturing has the highest utilization of ACH/EFT (30%) The respondents predict halving the use of paper check and will continue to be the vertical with the highest ACH/EFT adoption rate P-cards utilization is expected to double inline with other industries

check Current p-card payment share is double the average P-cards

21 Government For Government Government is near the average in use of ACH/EFT utilization The respondents predict halving the use of paper check Current p-card payment share is double the average P-cards utilization is expected to account by another 10% over the next three years

Financial Services For Financial Services Financial services current usage of e-payment is a little below the average for all participants Like Healthcare, Financial Services

22 Financial Services For Financial Services Financial services current usage of e-payment is a little below the average for all participants Like Healthcare, Financial Services predict nearly tripling the use of p-cards Financial services predict a reduction in the use of paper check that will take Financial Services to the average for all industries

rate is slower and the use of paper check payment method will be in line with other

23 Utilities/Energy/Communication For Utilities/Energy/Communications Current usage of e-payment is a little above the average for all participants The predicted adoption rate is slower and the use of paper check payment method will be in line with other industries They utilize p-card above the average and plan to continue p- card increase utilization

adoption rate is slower and the use of paper check payment method will be in line with other

24 Wholesale For Wholesale Wholesalers are the highest users of wire The use of ACH/EFT is above the average and predict a slower adoption rate There is a correlation with size The predicted adoption rate is slower and the use of paper check payment method will be in line with other industries They utilize p-card above the average and plan to continue to increase p-card utilization

25 Want to benchmark your AP operations? AP Productivity Index Collaboration between IAPP, APQC and PRGX Quarterly benchmark of AP effectiveness and efficiency Key first quarter results Top AP Performers are more likely to receive and pay invoices electronically Top AP Performers are more likely to use shared services Outsourcing is rare among top (and bottom) performers Top AP Performers are four times as likely to use p-cards Top AP Performers are less likely to use two-way and three way matching Visit the AP Index page on the IAPP Web site to participate

26 Thank You! For more information, visit or me at

The Future of Accounts Payable

May 7-9, 2017 Disney s Yacht & Beach Club Resorts, Florida The Future of Accounts Payable Presented by: Mark Brousseau May 7-9, 2017 Disney s Yacht & Beach Club Resorts, Florida Accounts Payable Automation