Navigate Your Way to Success with AP Metrics that Matter

Corporate Payments And Payables

Hugh Garber

Hugh Garber

Apr 16, 2018

The GPS is a technological advancement that never ceases to amaze me. You tell it where you want to go and it tells you how to get there, no matter how lost you may be. But what if the GPS loses its signal -- what then? How would you get to where you need to go? We’ve all had that scary moment driving in a tunnel when the GPS goes dark and you panic, not knowing what to do next until the little screen comes back to its senses. It’s a somewhat terrifying feeling of being out of control. If you apply this GPS analogy to AP departments today, it’s not a big leap to see the connection. AP departments know where they need to go – to a place of high efficiency, speed in processing, early-payment discounts, cash back rebates, cash management, etc.

Unfortunately, they have no performance metrics in place to tell them where they are, making it virtually impossible for them to get where they need to be or even know how far they’ve come. Ardent Partners revealed some surprising statistics in their State of ePayables 2017 report, most notably that “up to 24% of all AP departments lack the ability to track key performance metrics. For an industry that has struggled for years to gain executive awareness, engagement, and investment, this comes as no surprise. However; the fact that up to 12.2% of all AP departments have chosen not to measure, and thus, not understand how they are performing in key areas is both surprising and unfortunate.” Not sure what kind of metrics we’re talking about?

Here is a list of the top key performance indicators (KPIs) successful AP departments often track:

  • Volume
    • Total number of invoices received
    • Percentage of invoices that are electronic
    • Percentage of automated payments
  • Supplier
    • Percentage of suppliers using electronic invoicing
    • percentage of suppliers accepting early payment discounts
    • percentage of invoices linked to a purchase order
  • Productivity
    • Number if invoices processed per day or month per employee
    • Average time to approve invoices from receipt to payment
  • Cost
    • Average cost to process invoices by type
    • Percentage of discounts captured compared to total discounts available
  • Error
    • Percentage of erroneous payments
    • percentage of duplicate invoices paid
  • Exception
    • Percentage of invoices resulting in exceptions
    • Average time to process exceptions

By tracking these KPIs, AP departments can finally have insight into their performance and use that information to increase efficiency from a cost, productivity, resource allocation, and time perspective. The business will also be able to make optimal use of working capital and compliance with internal policies and negotiated supplier contracts will be strengthened. If so many benefits can be achieved, why are so many AP departments failing to track these KPIs? The answer is simple. System limitations and manual processes create a lack of visibility into AP activities. This is a driving reason why the Institute of Financial Management reports that 69 percent of controllers and CFOs cite improved visibility into the overall performance of finance and administration functions as their #1 AP priority. Ardent Partners said it best: “If you do not know where you are going, any road will take you there. Enterprise functions must be smarter than that.” Digitizing and automating the AP process delivers the visibility AP departments need to feel as though they have a functioning GPS system. By tracking metrics that matter, AP can navigate to the desired destination of end-to-end success across the entire invoice lifecycle, from receipt though making payment – with complete visibility, control, and efficiency. 

Related topics

Accounts Payable
Hugh Garber

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Hugh Garber

With 15+ years of experience in technology and cloud solutions, Hugh Garber helps AP departments automate the end-to-end AP lifecycle. He is the Director of Solutions Marketing for Paymode-X Business Solutions at Bottomline Technologies.
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