Cassie is a Customer Success Partner at Glean.
Including the questions that every AP team should be asking themselves
To get an edge in accounts payable, you need an intelligent accounts payable process that not only makes you a more efficient AP professional, but also provides strategic context on your company’s expenses while helping you identify wasteful vendor spend. We call this Smart AP.
Smart AP platforms, like Glean, not only provide operational efficiencies, but also make your vendor spend review processes and budget vs. actual meetings significantly more insightful.
More on that later — first, here are the three ways to make your accounts payable process more strategic and value-creating for your company.
Step #1: Analyze Spend
Does your spend comply with the terms established with your vendor? Do spending levels match your expectations?
If the answers aren’t clear to you, then we recommend you analyze your spend by performing a variance analysis on the vendor level to see if costs went up or down from the prior period.
If there is a significant or unexpected variance in spend, ask the respective budget owner:
- Do the pricing terms match what’s in our contract?
- Were new features added?
- Did usage increase or decrease?
- And for any identified changes, be sure to ask and understand why.
If usage changed, investigate to see if this correlates with your company’s internal metrics or KPIs. For example, if your month-over-month headcount increased 10% percent but your costs for Slack went up 25%, that change doesn't match up and you should drill down further to understand what drove the Slack increase.
Luckily, tools like Glean are available to help you easily analyze these activities and assess the drivers of any change. Specifically, Glean will analyze your invoices at the line-item level so that you can compare time periods, analyze line items, and understand changes on all your vendor spend, including bills paid through AP or with credit cards. The result: actionable insights on all the drivers of all your vendor spend.
Step #2: Determine if You’re Actually Receiving an ROI from Your Vendors
It’s important for finance teams and AP professionals to challenge budget owners on whether the company is realizing a return on investment on their vendor spend. AP teams can accomplish this by asking a few simple questions.
Does your vendor add value to the business? What business goals are supported?
Business goals evolve over time and the initial reasons to use a vendor may no longer be relevant. Or, you may have agreed to trial a vendor’s new feature for two or three months, decided it wasn’t for you, and simply forgot to cancel the trial, thus leaving that feature as a buried and forgotten line-item in your monthly invoice (quick note: a Smart AP platform will identify line-item bloat such as this). It’s important to check in and periodically ask budget owners these questions to find which vendors can be scaled back or cut out entirely.
At Glean, we know that only 30% of budget owners scrutinize invoices, meaning that the majority of invoices go unchecked. When those costs are not top of mind, it’s easy to lose sight of the vendor’s value. Don’t lose sight of their value.
When AP teams check in with budget owners and ask smart, relevant questions about their vendor spend, they not only ensure more responsible spend decisions by budget owners, but also begin to create a culture of spend accountability within their organization. By asking these questions, evaluating a vendor’s ROI becomes top of mind throughout the organization, resulting in a more strategic and improved AP process.
Step #3: Determine if You’re Getting Good Deals from Your Vendors
In addition to determining the ROI on vendor spend, AP teams should also challenge budget owners on whether they’re getting good deals from their vendors.
What’s a good deal?
Right now, one of the best ways to determine what’s a good deal is to have your budget owners research what kind of introductory offers are currently being offered for the product — or even have them directly ask their vendor contacts what those offers are — and compare that to your price. You can also research the vendor’s competitors and perhaps solicit a quote from one of them. Having a real alternative often brings out the best discounts and offers from your vendors.
Alternatively, you can also turn to a Smart AP solution like Glean. As Glean analyzes invoices at the line-item level from numerous vendors, it’s possible to access benchmarking data that can definitively tell you how your pricing compares to peers.
Bonus: Review Your Accounts Payable Internal Control Checklist
By using an internal control checklist, you can analyze the end-to-end process of accounts payable to become more strategic. This checklist includes:
Segregation of duties. Employees should not perform conflicting functions.
Reduce errors. A smart accounts payable software tool can reduce errors when you match an invoice, for instance, with a purchase order (PO) number to an issued PO. You can also check duplicate payments to eliminate double payments and increases in costs or expenses.
Data entry controls. One of the most time-consuming and mistake-prone activities of the AP process involves data entry. Minor mistakes can lead to double payments, significant overpayments, and incorrect journal entries. Automating the system reduces the chance of error greatly, essentially delegating the task to software and programming. Not only is this more secure, it frees up staff for more creative problem-solving work.
Analyze spend, evaluate if you’re actually receiving a return on investment from your vendors, and determine if you’re getting the best deal possible (and don’t forget to review your AP internal control checklist). Follow these three easy steps to make your AP process more strategic.
And contact us at Glean today to get clear visibility into your spend. Our aim is to unlock the powerful information detailed in vendor invoices to surface non-intuitive spend insights so finance teams are empowered to create a culture of spend accountability within their organizations. Request a demo to learn more.