4 Accounts Payable Metrics to Sharpen Your Invoice Processing
Your accounts payable metrics and accounts payable department can be a frequently overlooked part of your organization. Because it’s a source of money going out — instead of coming in — it’s often unpleasant to think about. But since you have to pay your invoices regularly, Accounts Payable becomes a ‘necessary evil.’
Breaking out of this thinking and paying close attention to your Accounts Payable processes can transform how you look at accounts payable forever. By examining your accounts payable metrics, you can define the effectiveness of your Accounts Payable department, identifying ways to effect positive changes through automation.
What Are Accounts Payable Metrics?
Accounts payable metrics determine how effectively and efficiently Accounts Payable(AP) meets specific goals and objectives. You can then use these quantitative values to improve overall employee work quality, drive individual employee performance, and lower AP-associated costs.
By recognizing which payment metrics are most important (your key performance indicators, or KPIs), you can streamline processes and realize concrete AP benefits, including:
- Increased transparency into your accounts payable processes, making it clear where time, resources, and assets are being needlessly wasted
- Reduced AP costs by eliminating duplicate invoice payments in addition to reducing identical work activities
- The ability to accurately measure department and employee performance, and track progress towards measurable accounts payable performance goals
- The development of a proactive work atmosphere, where AP staff are increasingly accountable, and automation is seen as a benefit rather than a threat.
The 4 Metrics your AP team should track immediately
- Total cost to perform the AP process per invoice processed (cost)
Once you capture all the expenses that happen for AP or another finance process, regardless of where it is being performed, you may notice redundancies and opportunities to streamline. Your approach is much less cost-effective and efficient than you think.
2. Number of invoices processed per AP Full-Time Equivalent (FTE; productivity)
There is a significant difference between top and bottom performers for these accounts payable metrics. Many factors can affect this metric, including automation, looking at bottlenecks within your organization, and shifting away from manual and traditional processes.
3. Number of AP FTEs per $1 billion in revenue (efficiency)
There is a big difference within this metric between the top and bottom performers, with a discrepancy of almost 80%. With the right solution to support a new workflow, organizations can improve this metric by a significant amount.
Being organizationally aware of its spend culture, AP managers could align teams and employees to ensure standardization of workflows that will increase the efficiency and performance of the AP function holistically.
4. Cycle time in days from receipt of invoice until payment is transmitted.
Organizations should supplement these core metrics with additional quality/error rates and stakeholder satisfaction that pinpoint their improvement concerns.
Implementing Accounts Payable Metrics
Tracking your AP metrics is beneficial in many ways, but the ultimate aim is to measure and analyze results for improvement. For example, it will be challenging to identify AP areas requiring changes without regularly tracking, measuring, and examining your metrics. Learn how to support your CFOs, CPOs, CIOs, and CEOs with the right data with Aavenir Invoiceflow, which elevates your AP and invoice processing by implementing top 4 metrics like Cycle Time, On-time Payments, Recurring Payment Visibility, Invoice Exception Rate.
