3 Tips For Establishing an AP Process Maturity Model

In this guest article, Brian Shannon - Principal Business Process Management Strategist at Dolphin, an SAP solutions provider - explores the stages of organizational maturity, and offers 3 crucial considerations for businesses looking to achieve and sustain optimized processes.

The concept of implementing a process maturity model in Accounts Payable can be daunting and confusing: 

• What constitutes a process maturity model?
• How can the current state of the organization be evaluated?
• When is the best time to implement an action plan to reach maturity?

These are questions that we’ve heard from Global Process Owners lately, particularly after our session on maturity models at this year’s North American GPO Summit.

A process maturity model allows GPOs to methodically evolve their processes for maximum efficiency and effectiveness. At each stage, organizations combine new technologies with new ways of processing to gather the granular information they need to understand not just the how, but, more importantly, the why behind each problem or exception. For GPOs, who are mandated to show continuous improvement, a process maturity model helps the company put measures in place that can reveal patterns that may be emerging.

 Understanding process maturity models

When evaluating process maturity, an organization will find itself in one of 4 stages (or in transition between stages): 

• Stage 1 - Traditional: This is the old-school style of handling processes. It’s paper-based, manually driven, highly inefficient and error prone. In a sense, it’s no different than what was done 50 years ago. 

• Stage 2 - Electronic: Invoices or orders are being scanned or received by email, which speeds data entry, but processing is still very manual. There is no transparency. 

• Stage 3 - Automation: This stage features workflows and notifications that make processing faster, but a lot of time is spent on handling exceptions. Basic data on daily volume, outstanding items, and number of exceptions are also being measured. 

• Stage 4 - Optimized: At this stage, process improvements are combined with technology to improve not just speed but quality and effectiveness. For example, electronic invoices and orders are supported with self-service portals and mobile approvals so that every stakeholder has easy access to the information. Processing isn’t just automated - it is touchless so invoices and orders move quickly through the company with minimal manual intervention. When intervention is needed, it is easy for users to identify the problem and take action quickly.

Reaching stage 4 takes planning, but by introducing incremental improvements using the process maturity model, GPOs can demonstrate value and introduce improvements that provide the head office with better global oversight and control, with the flexibility that local offices need to meet local staffing demands and regulatory compliance requirements.

To put a process maturity plan into action, consider these 3 tips:

1. Don’t just automate - innovate.

Many organizations introduce automation and think that, because they have faster data capture and offer a basic level of automated workflows, they are done. However, at the “optimized” stage of the process maturity model, organizations are finding ways to maximize process improvements and leverage technology to unlock real gains.

Take mobile apps, for example. Many organizations already use mobile apps for invoice approvals and expense reporting, but leading organizations use them to do even more. Mobile apps can be used to digitize every aspect of processing, such as tracking service entry sheets, entering orders in the field, and recording delivery notices. Not only does this eliminate paper, but it speeds up processing each step of the way and improves the quality of information available across the organization.

With completely digitized processes, organizations can develop new interactive reports and graphical scorecards that unlock essential information about the business that can be viewed by executives even when they are on the road.

Cloud technology has also transformed the way we do business. While initially adopted as strictly a cost-savings measure, the flexibility and scalability of cloud solutions has accelerated the pace of innovation in many organizations, with little additional overhead or effort.

2. Plan for Continuous Improvement.

The sign of a truly optimized process model is that it supports continuous improvement. It allows you to collect granular information at each stage of the process, which can then be analyzed and translated into actionable intelligence. For example, is it the same vendor consistently submitting an invoice with a PO number that needs to be sent back? Are there regular price discrepancies? Is there an approver who is always late on approving critical invoices?

By analyzing processes, organizations can uncover the source of, and remedy the most costly problems, whether it’s providing more training for a vendor that is consistently non-compliant or implementing new controls that enforce best practices and prevent leakage. For many organizations, even small improvements in capturing available discounts can add up to significant savings, and put organizations in a stronger cash position.

Improving processes can also change the value of work done across the organization. With an optimized process in place, AP staff can move from doing manual tasks to being critical thinkers who use their expertise to solve complex problems. Touchless processing exemplifies what is possible when you have an optimized process maturity model. It enables organizations to redirect the AP team to more value-added tasks, such as determining why exceptions are occurring and how to eliminate them in the future.

3. Don’t run from your ERP - embrace it.

Many GPOs look at their ERP and think it is the source of their problems. It is the system of record, but it has been around for 5, 10, or even 20 years and “can’t” be touched.

However, GPOs need to look at ERPs as part of the solution. Take SAP, for example: SAP is a proven, best practice ERP. It already has extensive, customizable functionality that organizations can use to achieve an optimized process model without investing in disparate bolted-on solutions that duplicate what the ERP can already do.

It also has a vast ecosystem of innovative technology options available to help improve processes. Cloud and mobile solutions to improve Finance, HR, and Sales processes are all available in the SAP ecosystem and have been vigorously tested. Organizations can be confident that these solutions are robust enough to scale to meet global demands without adding complexity.

However, many organizations don’t use their ERP to its full capabilities, and there are often beneficial functionalities that remain underutilized. It’s worth investing the time to ensure you are getting the most out of your current ERP investment.

So, what’s next?

With a process maturity model in place, organizations can make gradual process changes and achieve measurable improvements over time. By remembering these tips before undergoing a process improvement project, GPOs will be able to ensure a smoother transition that will result in a more effective operation once complete.

Where do you see your organization on the process maturity scale? For optimized organizations, what benefits have you unlocked? For others, what is still holding your finance department back?

For further information, visit www.dolphin-corp.com or contact Brian Shannon by emailing brian.shannon@dolphin-corp.com

About the Author:

As Dolphin’s Principal Business Process Management Strategist, Brian Shannon works with organizations to combine meaningful process change with best-in-class SAP technology to achieve sustainable, long-term improvements. He has more than 15 years of SAP experience and is recognized as a thought leader on the topics of process change, change management, knowledge management, and related topics.