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24 JULY 2001 - Nine in 10 British companies are overspending by a wide margin on invoice processing. This waste – the payables productivity gap – is costing hundreds of millions of pounds each year, according to new research from e-payables specialist Tranmit plc.
The company’s survey of 52 medium sized and large organisations identifies a wide gap between the most and least efficient. The study found a 5:1 ratio between the most productive and average performers, and an enormous divide separating the best and worst.
The average company has 14 accounts payable (A/P) staff, each of which processes just over 5,500 invoices per year. The best performers manage around 28,000 per year.
“What we are saying is that in typical cases, businesses are spending two, three or even four times more than they need to on paying their bills,” said Mary Kingman, business development director, Tranmit. “Our own experience based on implementing real-life e-payables systems suggests that a target of 16,000 per head is reasonable. Only five of the companies in our survey managed to meet or exceed that figure.”
The distribution giant MSAS/Exel recently opted for Tranmit’s Sprinter Invoice Approvals system as part of an overhaul of its accounts payable function. The company calculates the savings in staff and other costs at £500,000 a year.
Kingman said: “The productivity differential between one company and the next is accounted for by several factors – the number of suppliers used, size and structure of the organisation, whether invoices are electronic or paper, value and complexity of invoices, whether the finance function is centralised, and so on. But however you qualify the findings, they point to enormous untapped potential for improvement.”
Significant savings can also be obtained through the reduction in duplicate and overpayments. This is mainly caused from invoices lost in transit and requests for copy invoices, factors of a typical manual invoicing procedure.
“ Businesses who automate the account payable process are effectively e-enabling suppliers without them knowing it,” Kingman said. “Paper invoices are converted to electronic images at a central scanning department, and stored in the Sprinter system. The electronic images cannot get lost and duplicate invoices are easily flagged. The potential for paying twice is considerably reduced.”
As well as hard savings, businesses also stand to benefit from better relationships with their suppliers. “Most companies routinely fail to pay their bills on time. Paying early or within contracted terms not only leads to more cordial relations with suppliers, it puts the business in a stronger position when it comes to renegotiating contracts,” Kingman said.
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NOTES FOR EDITORS
Tranmit is the UK's leading provider of eProcurement and ePayables solutions to the corporate market place and developer of the award-winning Sprinter suite of products. By exploiting the latest browser-based technologies and electronic document management, Tranmit provide a range of integrated, modular solutions to automate and manage the requisition to payment process. The company has also developed unique technology that allows organisations to extend the benefits of Total Process Procurement and automation to include internet based e-commerce. Tranmit’s customers include Sony Music, Trinity Mirror, Exel Logistics, Scottish and Newcastle and Fisher Frozen Foods. For further information on Tranmit and its products visit http://www.tranmit.co.uk
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