One of the most common questions we get from shared services professionals is how to benchmark their shared services.
I’ve been working on quite a lot of recent surveys for sharedserviceslink.com and it’s been fascinating reading and analyzing the results. Looking back at a survey we ran with Ariba with over 200 European finance and AP executives, there is some great benchmarking information to develop helpful KPIs.
The report is certainly worth downloading in full. But I’ve picked out a few interesting figures from a benchmarking perspective.
How many invoices are processed per FTE?
This is a key KPI for finance shared services. Our survey results had a median number of invoices per full time equivalent (FTE) accounts payable staff of approximately 13,000 invoices per FTE per year. This was slightly higher than a recent Hackett Group benchmark showing 8,463 invoices / FTE per annum in Western Europe.
The Hackett Group benchmarks will show best-in-class (BIC) globally at 32,830 invoices / FTE per annum. However in the report, Ariba say they have seen companies with a strategic emphasis on e-Invoicing achieve levels of 80,000 / invoices per FTE or higher. Non-Top Performers from the Hackett study at 9,109 invoices per FTE per annum, and Non-Automated at 6,797.
Measuring process efficiency
Another measure of process efficiency is the elapsed time from invoice receipt to approval for payment. Almost 55% of respondents said they process invoices in an impressive 10 days or less.
From a regional perspective, 60% of the respondents from the United Kingdom and Ireland say they post an invoice within 10 days of receipt. DACH countries (Germany, Austria, Switzerland) on the other hand, had 30% of respondents say less than 10 days. France had 70% state less than 10 days, and Benelux countries had 45% say less than 10 days.
Discount capture
70% of respondents captured less than half of their available discount savings opportunities. This means they miss as much as €2 million per billion in spend from pre-negotiated discount terms (i.e. 2% 10 Net 30). Outside of the Nordics, Europe trails the rest of the industrialized world in terms of e-Invoicing adoption and strategic programs designed to maximise discount savings.
As an example, a recent Hackett Group study showed that while nearly 70% of North American companies have some strategy for capturing discounts, only 35% do so in Europe.
Those with no plans for e-Invoicing have by far the worst discount capture rate.
Why is this the case? Possibly because they do not have the technology in place to accommodate the sliding scale required for dynamic discounting. It also may be simply because with paper they do not have visibility into discount opportunities. Or they may not have the proper alignment between Accounts Payable, Treasury and Procurement to allocate the short term cash necessary to fund an early pay discount program. Whatever the reason, the fact that they are able to post invoices quickly is not paying off as much as it could because they are leaving significant pre-negotiated discount
savings on the table.
PO-Backed invoices
About 35% of respondents have 50% or less of their total spend is PO-based. However, this result varies by country. DACH, for example, had 85% of respondents saying over 50% of their invoice were PO-backed, whereas the United Kingdom and Ireland are only 65%. Nearly 60% of the respondents that transact electronically have 70% or more PO-Invoices. Leading e-Invoicing providers offer PO-Flip®, a powerful feature trademarked by Ariba, which allows suppliers to automatically copy data from a purchase order into an electronic invoice. This saves typing and rekeying, and avoids costly errors and exceptions.
You can download the report in full from Ariba’s website.
Interested in more surveys or benchmarking information? What would be the most helpful information?
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