Whether you are considering a new accounts payable automation solution or simply wanting to set goals for a new fiscal year, accurately measuring your accounts payables performance can deliver critical data that impacts the bottom line. Tracking the right performance indicators and improving upon them can boost AP performance, saving your business time, money and resources. In this post we will list 5 key performance indicators or KPIs in accounts payable.
Track your invoice journey to accurately gauge the average time of your end-to-end AP process, as well as the time spent for each step on that journey. This will help you create a strategy to shorten your time per invoice and it will also help calculate the next KPI for AP--your cost per invoice.
This is often considered the most important KPI in accounts payable. Learn more about calculating how much it costs you to process an invoice. “Companies that use little or no automation tend to spend more than $10 per invoice, while companies that have little to no manual steps in their AP process spend $2 or less per invoice, according to data from the American Productivity & Quality Center. That means if you have not automated your payments process, you could potentially reduce your AP overhead by 80%. This is why the cost to process an invoice is such a key metric.”
This will also help you determine your cost per invoice. This step is not just about seeing who can process an invoice the fastest, but to identify bottlenecks in your process to make your team's job easier.
Exceptions can hobble your entire AP process and even impact an already stressful period closing. What percentage of total invoices are flagged for exceptions? What are the most common types of exceptions? Understanding these issues and finding effective solutions for these problems is key to reducing AP Overhead.
The previous four KPIs for AP departments should be included in ongoing tracking, but what if you are considering a software implementation or other project that requires AP change management? Determining the number of steps required to process, approve and pay an invoice is a critical metric for identifying and reducing redundancies and it is a good to reevaluate this on an annual or biannual basis.
If your AP department is not performing as well as you know it can, it can be frustrating and costly. Luckily there are a few steps you can take to improve your accounts payable process. The simplest, quickest and often the most cost-effective way to improve your AP process is automation software. AP Automation software will not only save money and help you improve these performance indicators, but it will help track them with more accurate data insights. But it isn't the only step. Read this post to find out more about How Your Accounts Payable Process Can be Improved.