How AP automation performance metrics tie into Accounts Payable goals setting
- 11 Oct 2019
- Best Practice & Strategies
A fact few professionals stop to analyze is how AP automation performance metrics tie into both business and accounts payable goals setting. Consider the crucial link between building relationships with suppliers and saving money to ultimately become a trustworthy and profitable business. And, when the vendors are happy, companies gain access to money-saving opportunities and can pass these savings on to their valued customers.
Savvy AP team members and the C-suite are learning the value of KPIs and benchmarking as measurements to develop meaningful goals that impact the organization as a whole. Finding out the current level of performance helps companies identify relevant goals as well as achieve and exceed these goals. Discover how AP automation performance metrics tie into modern accounts payable goals setting.
Keep KPIs in Mind
AP KPIs provide baseline metrics to determine the overall performance of the department. Analyzing KPIs is crucial to the AP department and C-suite to assess speed, goal fulfillment, and the impact of certain actions on accounts payable. Understanding the costs and time frame defines the current success of the AP department and where potential improvements can be made. Several KPIs should be carefully reviewed for goal-setting on an organizational scale:
- Cost per invoice to find out what the costs the company to process supplier invoices
- Invoice lead time to determine how long it takes for the organization to pay suppliers
- Number of invoices per AP full-time employee to assess overall productivity within the department
- Automatic distribution percent for a robust perspective on workflow performance
- Touchless processing ratio to ensure the process is as fast, efficient, and streamlined as possible based on modern technology and best practices
The total cost per invoice is based on several variables including the cost of overhead and labor, outsourcing, and other AP costs for processing. To determine the cost per invoice, divide the cost to process AP by the total number of invoices processed by the organization. The bottom 25 percent of companies are spending $10 or more per invoice, revealing plenty of room for the type of improvement that happens as a result of analyzing KPIs. With other companies spending as little as $2 per invoice, there are many factors to consider to reduce the cost of invoicing.
Using Benchmarks for Setting Goals
AP and business transformation go hand-in-hand by using benchmarks and AP automation. Consider the benchmarks to review and use for goal setting and why they play an integral role in future planning:
- Track key performance indicators (KPIs), including touchless ratio to reveal how efficient and quick it can be to process invoices without hands-on human intervention
- Compare current automation performance levels against accurate, relevant, and real-world benchmarks for the most honest data
- Drill down on detailed data to reveal AP process bottlenecks and identify areas for improvement to further streamline operations
- Leverage best practice workflows and consult experts for continuous improvements that can be made through the smart integration of AP automation.
Setting Objectives for Accounts Payable
Setting objectives for accounts payable is crucial to realize the myriad of money-saving and profit-improving savings that can be implemented in this department. Increased profits are one of the key reasons for these goals that help improve overall business operations. Focus areas include:
- Timely entry of all pertinent data, including vendor contact information and current invoice totals
- Reduced errors due to fewer manual processes that leave room for human mistakes
- Turnaround time improvement as a result of an efficient and touchless invoice approval process
- Capture supplier discounts by gaining a handle on making timely or early payments to realize these benefits
- Manage and optimize cash flow by watching every aspect in real-time
- Improve vendor relationships through accurate data and timely payments
- Timely and accurate data to financial statements to help management find areas where improvements can be made
- Support other business departments and the C-suite by providing accurate financial data for more informed business decisions
- Reduce staff turnover in AP and attract the younger generation
- Cost reduction through timely identification of bottlenecks and other issues
- Efficiency and streamline operations through the savvy implementation of AP automation
AP automation plays an important role in improving operations and setting and achieving overall goals. Accuracy, efficiency, and timeliness are all analyzed to improve operations and hiring practices. By measuring current performance based on real-time data, companies can establish meaningful goals based on facts rather than speculation.
Harness the power of AP automation to define and achieve accounts payable and business goals based on accurate performance metrics. Analyzing the current data is crucial to develop strategies to optimize human resources and time. Accurate data opens the door to developing targeted plans to improve operations, increase production, and boost profits. By doing so, the AP team will prove its value to the organization and take on a more strategic role in the business.