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Cost per invoice – best in class?

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  • #49597

    ROSS
    Member

    I am working a project right now on the Procurement to Payment process for a large Shared Services organization.  Does anyone have a metric for cost per invoice (or something closely related) which might be considered best in class?  If so, how did you calculate it?

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    #169688

    Dr. Ravi Pandey
    Participant

    Tony,There is no easy way out…it is not a six sigma question, it is simply a business topic and may be your friends from finance can help. Logically, it is fixed and variable cost.  You have the cost of employees which does not change unless you are adding/firing etc.  It is just spread over the invoices and will go down as the invoices increase to a limit.  Same applies to your fax machines, mail room handler, etc.  The variable cost is paper, postage, telephone etc.If you can reduce the cycle time, rework, you will see benefit. Now on the side of timely invoicing, you will get faster money and that means you have better cash flow which can be used to create more revenue (this is at the minimum calculated based on the cost of capital). Talk to your accountant..they should know this – my experience is mixed- more often than not I end up teaching them. It is a matter of experience. Hope this gives a hint.Ravi

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    #169702

    Adam L Bowden
    Participant

    Well … I have driven a lot of projects / deployments in this area.
    Although there are some Six Sigma projects here it is more of a
    Lean strategic deployment project within the total value stream.The benefit is not in the cost per invoice, even though there is
    some benefit her, but in Inventory reduction, supply cost
    reduction, unit cost reduction etc etc which can provide for some
    massive impacts.This is an excellent project.Regards,Adam
    http://www.linkedin.com/pub/0/317/397

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    #169910

    Jeff Martin
    Participant

    As far as $/inv there’s an IOMA benchmark paper you can find that may be helpful. Our company also is not advertising savings in this area (tho the team is watching it). As others mentioned you’ll need a cost accountant to assist when you get into the details.In addition to $/inv consider measures of effectivness, thruput yield for example, that will show sucess when reducing complexity and improving quality.

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    #170023

    Loehr
    Member

    APQC has some benchmarks in this area (Accounts Payable and Expense Reimbursement).  I am leading similar effort (as a contractor) for a governement entitity.  Our process is very immature and has a number of pain points.  We are still working this through a DMAIC but have focused our Measure and Analyze phases around a Value Stream Mapping exercise tailored to our situation.  Would be curious for any of the Lean experts to frame this better in the Lean context.   

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    #179448

    Tommy
    Member

    Tony, probably too late to be of tremendous help, but I focus on this issue at my company (Verian Technologies — http://www.verian.com) and have seen costs across the board and many different ways of calculating them.  AberdeenGroup does a  pretty good job of calculating cross-industry costs per invoice, and their latest benchmark study (March 2008) focusing on this area stated that invoice receipt-to-payment settlement costs for PO-based invoices is $12.60 when processed electronically; $20.30 when processed electronically.  For non-PO invoices, electronic is $14.00 and manual is $21.10.

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