The most common question we get from client organizations is “What technology makes the most sense for automating our operation?” But we think there is a better, more important question that is frequently left out. How should I justify the automation of our operation?
Going paperless requires corporate buy-in. And in order to get that buy-in, you’re going to have to develop a bulletproof business case. The first step is to accurately profile how you are doing with your existing process. Some call it current state analysis, others call it benchmarking.
Why do you need to benchmark?
It all comes down to numbers. Be prepared to justify those numbers. It’s always hard to overcome the inertia of the status quo. So, you have to present data to support your claims.
But how to you go about illustrating and driving home your point? Benchmarking. There are many different reasons why you should want to benchmark your financial operation:
- Allows you to compare your performance with companies within your industry who are world-class organizations and competitors
- Provides a baseline, supporting a “before and after†comparisons when undertaking an improvement projects, such as a new payables or procurement system
- Identifies ways to improve and augment your business processes, people, organization, and technology utilization
- Provides insight into areas that are performing well and into areas for improvement that will yield the highest ROI
Know Your Pain Points and Establish a Baseline
In trying to determine which areas to benchmark, ask yourself the question: “Where are the greatest pain points in our AP process?†In most companies, discrepancy resolution and processing invoices for approval are the top pain points.
When benchmarking, also consider what your mainstream peers are doing and what the innovators are doing. P-cards and front-end imaging are mainstream initiatives while dynamic discounting is more popular among innovators.
Develop payables metrics to compare what you are doing with what your peers are doing, and what your costs are in comparison with alternate methodologies. For example: What are you paying per invoice? How many days does it take to process that invoice? How does this impact your ability to pay within terms and take discounts? Using all this data to figure out your baseline is critical, and it will become the foundation of your business case.
Consider Your Options
Based on your analysis, consider what problems you want to solve and where you want to start. Here are the that the most commonly stated problems in accounts payable operations following:
- “Disputes and discrepancies are killing our productivity,â€
- “Average invoice approval time is too long,†and
- “We need to reduce the number of Non-PO based invoices.â€
These problems extend outside the AP department and are exacerbated by people in other departments. For example, delays in invoice approval caused by inefficiencies outside your department can cost your company its trade discounts.
AP is often reluctant to take ownership of problems generated outside their department. But these inefficiencies can represent opportunity, because they represent cost that can be controlled through paperless technology. If you can quantify these costs—if you can quantify, for example, how much your company is losing in discounts because of avoidable delays—you have the basis for a strong business argument for automation.
Final Thoughts | The Big Show!
Show your business case to others before showing it to the CFO to get a reality check. Be clear about your assumptions to avoid triggering doubt in the CFO’s mind and undermining your credibility. Present multiple scenarios, considering the best, the worst, and the most likely scenario to demonstrate to the CFO that you have thought your proposal through carefully.
Make business case communication your personal goal and one of your core competencies. You’re going to need skill in going forward with your proposal. Also, team up with the right business partners to help build your case. Since you do not want to overwhelm the CFO with data, follow these steps:
Present your business case in two stages. Start with a two-page outline (a trial balloon), and if your proposal survives that first exposure, then move on to the full fleshed-out document.
- Develop a high-level project time-line with milestones.
- Outline three scenarios for implementation: best, worst, and most likely
- Show aggressive versus conservative adoption savings
- Identify the type of value the project will deliver
- Prepare a multi-faceted ROI analysis including a detailed breakdown of costs and cash flows from the project.
Selling Your Vision
Making a bullet-proof business case comes down to selling yourself and your vision to upper management. Spend adequate time to craft your story and bolster your credibility. Explain why the status quo is inadequate by breaking up the issues into simple, easy to understand bite-sized chunks. Then, come in with your core message. Most important, find yourself some champions within the company, establish common goals with other departments, and show the advantages of going paperless to everyone in the company. That way, it is not just a case of “AP against the world.
