Accounts Payable Performance

Lean Wednesday Tip: Accounts Payable Performance

 

“By encouraging your A/P team to report and make critical department KPI metrics visual, such as, process cycle time, activity lead times, and cost per invoice with industry and competitor comparisons you realize the opportunity to reduce costs, increase productivity and streamline processes.”

Reduce A/P and A/R Errors with Standardized Work

Per my previous article, “Taking a Visual Management Approach to Accounts Payable”, I touched upon a Lean Six Sigma technique, called, Standardized Work.

“Standardized work is often referred as standard operating procedures to refer to the activities that must happen in order to complete a process. Essentially, everyone doing the job does it exactly the same way.” There should be no difference as to how your Sr. Accounts Payable Manager enters and processes bills versus your Junior Accounts Payable Coordinator. There would also be no difference between the 10th time they did the work or the 7,000th time they performed the work.

These standards and process procedures should include visual checklists, setup procedures, an integrated preventative plan, or other process steps. They should be written in terms of expected behavior or actions, and must be auditable.

Why do visual process controls make sense? It is known that people gain 80% of their information from their vision, 18% from their hearing and 2% from other senses. By implementing visual standard operating procedures for Accounts Receivable and Accounts Payable you aid in the reduction of transaction errors and process cycle time; and improve overall productivity, and client and vendor relations.

Critical departmental information, such as, KPI metrics (cost of A/P and A/R invoice, current process cycle time, on time delivery rate, et cetera) compared with industry and competitor data should also be visual as this will prompt your team to look for opportunities to improve.