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5 Accounts Payable KPIs Worth Tracking

April 29th, 2021 by Justin Cunningham

5 accounts payable KPIs worth tracking

Is your accounts payable (AP) department being tasked to better monitor, track and improve key performance indicators (KPIs)?

Then you’re well aware that it can be a daunting task. Why? There are an infinite number of KPIs that you could track to measure AP performance. Deciding which accounts payable KPIs to track depends on your organization’s and department’s goals. However, these KPIs are a great place to start!

5 Accounts Payable KPIs You Should Be Tracking

  1. Cost to process a single invoice

    As much as you’d enjoy it, your suppliers aren’t just going to stop wanting payments. Processing invoices (especially manually) can be expensive when accounting for costs associated with routing, copying and follow-up, staff salaries, managerial overhead and IT support.

    What does the data say? According to a 2018 PayStream Advisors study, the average cost to process an invoice with little automation is $15.00. Yikes — that’s a big hit to the bottom line! Those that have developed a more mature level of automation are processing invoices at only $2.36 on average.

  2. Time to process a single invoice

    People say time is money for a reason, and accounts payable is no exception. The time it takes to process an invoice is a great KPI to track for determining how much value an AP department is either wasting or adding. Longer invoice processing times often lead to missed vendor discounts, late payment fees, low staff productivity, and supplier dissatisfaction.

    What does the data say? According to the previously mentioned 2018 PayStream Advisors study, the average time to process an invoice with little automation is 45 days, while those with mature levels of automation process invoices in five days on average.

  3. Number of invoices processed per day per AP clerk

    Measuring staff productivity is a great way to pinpoint exactly which suppliers are causing your staff the most problems. This can be calculated in three steps:

    1. Take the number of invoices processed per month.
    2. Divide by the number of FTEs who process them.
    3. Factor in who’s responsible for what aspects.

    What does the data say? Ok, so there’s not a definitive market average for this one because of all the different factors that play into the calculation. However, once you begin tracking your AP staff’s productivity, you’ll easily be able to see who your top processors are! Parts Town was able to increase productivity 60%, going from 57 invoices per day per user to 92.

  4. Percentage of invoices linked to a purchase order (PO)

    Invoice validation is a key step in AP invoice processing which is why delays, like information not matching PO data, are concerning. Typically, the higher the percentage of invoices linked to a PO, the faster and less expensive your AP process will be.

    What does the data say? According to findings from Ardent Partners’ 2018 study, the market average for the percentage of invoices linked to a PO is 60.5%. On the other hand, those dubbed as “best-in-class” have an average of 73.3%.

  5. Invoice exception rate

    The amount of time and resources required to manage invoice exceptions is a major reason why many AP departments underperform. Exceptions are often caused by discrepancies in PO and invoice data, missing/incorrect POs, and bottlenecks in the approval workflow.

    What does the data say? Based on findings from the same Ardent Partners study cited in previous pages, the market average for invoice exception rates in 23.9%, compared to 10.7% for those in “best-in-class” standing.

Measuring KPIs with Real-Time Analytics and Dashboards at Function 4

Just as important as knowing which accounts payable KPIs to track, is having the technology in place to gather, sort and distribute the data you’re collecting. A robust AP automation solution should provide you with real-time analytics and the dashboards you need to make tracking your KPIs easy.

Posted in: Automation