Implementing a process improvement in accounts payable can seem like trying to move the earth. As AP staff struggle to keep their heads above water while simultaneously fighting large workloads and inefficient processes, there is very little time or energy available to focus on process improvements.

She says that accounts payable staff members rarely receive the training necessary to become good leaders. They have become accustomed to taking the blame for any and all late or missed payments. As a result, AP employees have a tendency to be reactionary.

If AP can instead adopt a positive attitude, then the real work improving processes can begin. Some techniques AP managers can implement to stimulate process change include creating an environment where employees are free to make suggestions, tracking metrics, and developing an overarching process improvement culture in the department.

Changing the Environment

In order to make changes in an organization, it is essential to understand why things are being done a certain way in the first place. Successfully creating a process improvement atmosphere requires AP managers and staff to not be afraid to ask why.

For example, Author Jack Daly describes how asking "why" once helped him save money and time in his company's finance department. At the time, the department was printing dozens of monthly, weekly, and quarterly reports and delivering them to finance managers.

Realizing that this process used a great deal of paper and required the organization's printers to be consistently active (these were the days before email and laser printers), Daly began asking the managers why they needed these reports so often. What he found was that they didn't. Daly then established a system where managers would place orders for specific reports they wanted and when. The result was that the printers were only operating one day out of the month.

Employees who consistently ask why often find they are more effective when they understand the reasons for performing a particular task. It is up to AP managers to encourage their employees to be inquisitive.

Catalyst for Change

Having inquisitive, engaged employees is a means to an end and that end is process improvement. A staff that questions why they are doing something will be driven to improve if there is a better way. While this is the ideal situation, the truth is that often there is an outside event, such as a merger, that acts as the catalyst for process improvement.

The catalyst for change can come from a variety of places. While it can be a mandate from above, it could just as easily come from employees realizing there's a better way to do something. Regardless, the best AP managers encourage their departments to be ready to offer and accept new ideas.

Developing and Tracking Metrics

Once you have created an environment that is open to change, you then must determine how to take advantage of it. The key to all effective process improvement is first understanding your as-is processes. This means metrics.

Metrics are powerful tools for stimulating change. Not only can the right metrics give you an idea of which processes are inefficient, but they do so clearly and without emotion.

When developing a metrics program, organizations face challenges in determining which metrics to track. AP managers should designate a particular office space in their department as the metrics room. The metrics room is a safe place where AP staff members can recommend measurements and discuss the results.

Some common metrics that many organizations measure include cost per invoice, general ledger costs, fixed assets per FTE, and journal entries per FTE.

Adopting a Continuous Improvement Culture

Encouraging employees to be inquisitive and developing a formal metrics program are effective tools for promoting process improvements, but keeping the momentum can be difficult. Doing this requires an AP department to adopt a continuous improvement culture.

Whether it be a formal program like Kaizen or Six Sigma, or something as simple as arranging a meeting in your metrics room each week, continuous improvement programs are a way to consistently streamline processes and reduce costs. According to Hackett benchmarking data, having a continuous improvement program in place produces quantifiable results.

For example, 59 percent of organizations without a continuous improvement program expected to cut operating costs by 20 percent when switching to a shared services center. In reality, just 46 percent managed to save 20 percent. On the other hand, 77 percent of organizations with continuous improvement programs expected to save 20 percent, with 81 percent actually reaching that level of savings.

Some of the qualities that Hackett research found are essential for a successful continuous improvement culture include:

• Using metrics to identify processes to improve
• Staffing the selected projects
• Identifying root causes of poor performance
• Developing and executing a plan to address the issues
• Following up to ensure root causes are addressed

Continuous Improvement in Your Organization

While many organizations understand the benefits of a continuous improvement program, they may feel the costs are too significant. However, there are some inexpensive ways they can begin making process improvements.

One area to improve AP without spending a lot of money is in th call center. Because vendors are calling whenever they have a problem (such as a late invoice payment), these calls are an ideal place to start. Look at how many calls are coming in, what problems the vendors are having, and how much time it takes the department to resolve the issue. You can then track these metrics and develop ways to improve.

When developing a continuous improvement culture, it again becomes important for managers to solicit ideas from their staff. During meetings, employees should know that their opinions have the same weight as their manager's. Everyone is equal. If they know their suggestions will be taken seriously, they are more likely to make them.

Activity-based Management

A key component to any organization's continuous improvement program is the concept of activity-based management. Activity-based management involves analyzing processes based on what activities in the department they support as opposed to solely what they cost. By eliminating inefficient and redundant processes, the organization can streamline operations and reduce cost.

For example, while an AP chart of accounts will state that an organization spent $300,000 on salaries and $20,000 for supplies, it does not report how much money was spent to perform a particular task, such as process an expense reimbursement. Under activity-based management, the organization can look at particular tasks and eliminate non-value-added assignments.

Stimulating Change

Implementing a continuous improvement program is the single most important tool for promoting and stimulating change in an organization. Despite the benefits of adopting a continuous improvement culture, doing so doesn't have to break the bank. Hackett research states that leading organizations actually spend less on their quality improvement programs than other organizations.