Multi-site manufacturers with ten, twenty or more plant, warehouse and corporate office locations can generate a substantial volume of bills, which are likely paid both centrally and at specific sites. In aggregate, the bill paying process can be difficult for the accounts payable team to manage.
Chief among the invoices pouring in for processing are utility bills, which amount to the third largest expense many companies pay behind labor and materials. In most Accounts Payable departments, utility bills are processed and handled just like any other bill. That’s a mistake, and not just because of the sheer expense associated with them.
Utility bills aren’t just expensive; they’re also incredibly complex. Unlike many bills, utility bills typically lack purchase orders, they require manual general ledger mapping, and the general form and detail of the invoices varies significantly from one provider to the next. Because utility companies’ billing systems, billing periods, and levels of bill detail are all widely variable, accounts payable departments at multi-site organizations are subject to a time-consuming and resource-intensive exercise managing and processing their invoices. The complexity and inefficiency associated with utility bill processing is backed by the numbers:
- According to Aberdeen, it typically takes enterprises anywhere from 17.4 to 29.8 days to internally process a single invoice
- Ecova, a commercial & industrial expense management company, finds that it’s not uncommon for up to 6 percent of utility bills to require reissue due to error or revisions on previous bill estimates
- Aberdeen also pegs the average cost to process and pay a bill at $21.43 per payment; multiply this cost by a high volume of payables, and it will become clear that paying expenses is rather expensive
But, while creating utility bill payment efficiencies presents most organizations with a clear savings opportunity, prospecting those savings can’t be predicated on processing speed alone. Careful attention to utility bill payments is a prerequisite for the identification of billing errors, such as those caused by estimated bills, overlapping service dates, and incorrect meter reads. Utility bill payment data is also a prime source of the data that drives energy efficiency and sustainability improvement initiatives. Paying utility bills and managing accurate utility bill pay data requires a delicate balance of efficiency and attention to detail.
The Bigger Picture – Energy Efficiency Management
There is another component to utility bill payment that is often missed. Today, manufacturers and others have new levels of options for energy consumption, which is predicted to increase in the future. How do you best assess if solar energy is a viable sustainability option for a facility? What about the “smart grid” where energy could be generated at a plant, and then re-sold back to the community? In order to best assess these types of energy consumption options, it is necessary to have a very strong understanding of exactly what your current energy consumption costs are, so as to provide a baseline for the necessary analytics to evaluate options. Here is where having visibility to utility bill details can really make an impact on future energy costs.
Your internal accounts payable team is no doubt fully capable of managing most payables in accurate and timely fashion. Utility bills, however, present a unique challenge; they’re characterized by a short payment cycle, but auditing and reconciling billing errors internally is an incredibly time-consuming exercise. What’s more, accurately collecting, analyzing and reporting on the detailed utility bill data that informs energy efficiency investment decisions and sustainability initiatives adds a step that’s typically foreign to accounts payable departments. In these cases, it might make sense to take advantage of a data management platform in order to best track, manage and really understand what energy costs are being paid, as a direct route to avoiding overpayment, and uncovering the value hidden in historical utility bill data.
If you liked this article, here is another you might also find interesting:
