What are the Best KPI for Accounts Payable

In business processes, a performance goal can be measured in qualitative terms. This goal can be linked to metrics known as ‘KPI’ or a Key Performance Indicator.

By tracking their KPIs, employees can make the right decisions and benchmark their organization’s performance against peers or other companies in the industry.

This can especially be useful for accounts payable process. If the company has a huge number of invoices coming in from vendors and suppliers, then accounts payable may have to become automated. Therefore, that becomes one of the KPI for Accounts Payable – where automation can help increase efficiency.

Advantages of Tracking Accounts Payable KPIs with Automation

  • Companies would need accounts payable key performance indicators because this department has to really perform at its utmost efficiency.
  • Since it is at an intersection of other business processes, a mistake in the Accounts payable department can have a ripple effect across the company
  • AP practices involve processing a huge number of invoices, and some errors can happen.
  • By identifying Accounts Payable KPI, the organization can start delving deeper into this process and make sure that answers are taken up.
  • Perhaps the number of invoices being processed is more because the business is working with too many different suppliers and missing out on discounts or savings on costs by consolidating business with a few important suppliers. This is solid grounds to consider a KPI.

The 7 Most Valuable Accounts Payable KPIs

  • Cost of Processing an Invoice: Among the many KPI for the accounts payable process, this is one of the most important ones. By investing in an automated AP system, there may be costs that the company bears as much as the cost of hiring an employee, operating expenses, and other supplier charges. This KPI can be calculated by the total number of invoices received divided by the total number of invoices processed. The average cost per invoice should be kept lower, to ensure lesser costs to the company.
  • Duplication of Invoices: To keep relationships between vendors and the company secure, there should be lesser errors or duplication of invoices. This has to be avoided and the KPI here is that lesser number of duplicated invoices per month would lead to greater productivity.
  • Invoices Processed Per Employee: It is important to determine the average number of invoices processed per employee per day. This can give allow the business to dig into the reasons behind lapses This KPI will differ based on the industry in which the company operates.
  • Average Time for Invoice Approval: Now one of the leading objectives for AP teams is to reduce the amount of time that invoice processing occurs. One of the ways this has become possible is thanks to the automation brought out by Easy Access AP or similar accounts payable software. Spending lesser time can lead to greater productivity
  • Late Payments: Some payments may not be sent out at the time they’re supposed to go. So an important KPI for invoice processing is to ensure that payments happen on-time. More the number of late payments, greater the effect on your company will be.
  • Getting the Right Discounts: With automation, invoices are processed faster, so companies can take advantage of early discounts offered by vendors. It is an important KPI for the accounts payable department, because a notification can let you know when the window of the discount is about to expire. Therefore payments can be made on a timely basis to avail these offers.
  • Tracking Invoices: By using accounts payable processes, invoices can be processed quicker and in a cheaper manner. By calculating the percentage of e-invoices based on the percentage of suppliers sending them, you will have a clear KPI in accounts payable. One more advantage of automated AP processing is that suppliers can be on-boarded to the system easily enough.

If the accounts payable team looks to achieve these KPIs, there can be a smooth and streamlined process of approvals and cash flow can also be kept in check.

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