Examples of Accounts Payable KPIs: Measure and Track for Success

When it comes to managing the accounts payable (AP) process, tracking key performance indicators (KPIs) is crucial for success. By measuring and monitoring these KPIs, AP teams can gain valuable insights and make data-driven decisions to improve operational efficiency and optimize their processes.

Why are KPIs important in Accounts Payable?

Before we dive into specific examples of AP KPIs, let's understand why KPIs are important in the accounts payable function. KPIs serve as measurable goals that help organizations track their performance and identify areas for improvement. In the context of accounts payable, KPIs provide visibility into the efficiency, accuracy, and cost-effectiveness of the AP process.

1. Average Time Per Invoice Processed

One of the key KPIs to measure in accounts payable is the average time per invoice processed. This metric helps organizations assess the efficiency of their AP team in handling invoices. By tracking the time it takes to process an invoice from receipt to payment, organizations can identify bottlenecks and streamline their processes to reduce the processing time.

2. Cost Per Invoice Processed

The cost per invoice processed is another important KPI for accounts payable teams. By calculating the total cost incurred in processing invoices and dividing it by the total number of invoices processed, organizations can determine the average cost per invoice. This KPI helps identify opportunities for cost savings and process optimization.

3. Number of Invoices Processed / Employee / Day

This KPI measures the productivity of the AP team by calculating the number of invoices processed per employee per day. It provides insights into the workload of the team and helps organizations allocate resources effectively. Increasing this KPI can be an indicator of improved efficiency and capacity.

4. Percent of Invoice Exceptions

The percent of invoice exceptions is a crucial KPI for accounts payable as it measures the accuracy of invoice processing. High percentages of exceptions indicate potential errors or discrepancies in the AP process. By monitoring this KPI, organizations can identify areas for improvement, such as implementing automation or improving supplier communication.

5. Days Payable Outstanding (DPO)

Days Payable Outstanding (DPO) is a financial KPI that measures the average number of days it takes for an organization to pay its invoices after the receipt of goods or services. A lower DPO indicates faster payments and better working capital management. Monitoring DPO can help organizations optimize their cash flow and supplier relationships.

6. Average Time to Approve an Invoice

This KPI measures the average time it takes for invoices to be approved within the organization. Delays in invoice approval can result in late payments and strained supplier relationships. By tracking this KPI, organizations can identify bottlenecks in the approval process and take corrective actions to improve efficiency.

7. Invoices Processed Per Year

The number of invoices processed per year is a straightforward KPI that provides an overview of the AP team's workload and capacity. By monitoring this metric, organizations can assess the team's performance, identify seasonal patterns, and plan for resource allocation.

8. Percentage of Supplier Discounts Captured

This KPI measures the percentage of supplier discounts captured by the AP team. It indicates how effectively the team takes advantage of early payment discounts offered by suppliers. By improving this KPI, organizations can save costs and build stronger relationships with their suppliers.

9. Percentage Of Late Payments

The percentage of late payments is a critical KPI for accounts payable. It measures the proportion of payments made after the due date. High percentages indicate potential issues with cash flow management or process inefficiencies. By monitoring this KPI, organizations can identify areas for improvement and reduce late payment penalties.

10. Payment Errors

Payment errors are an important KPI to track in accounts payable. They measure the number or percentage of payments that contain errors or inaccuracies. High payment error rates can lead to financial losses, strained supplier relationships, and potential compliance issues. By monitoring this KPI, organizations can implement corrective measures and improve payment accuracy.

Conclusion

Tracking and measuring key performance indicators (KPIs) is essential for accounts payable teams to optimize their processes and improve overall performance. The examples provided in this article highlight some of the crucial AP KPIs that organizations should consider measuring and tracking. By leveraging these KPIs and embracing automation technologies, AP teams can drive efficiency, reduce costs, and enhance their contribution to the organization's success.