5 KPIs Every AP Leader Should Know

Guest Post by Canon U.S.A. Inc.‘s Digital Imaging Solutions Division

There are so many Key Performance Indicators (KPIs) to choose from in accounts payable that it can be difficult to determine which ones could have the biggest impact on your department’s success.

But without setting goals and tracking your progress, it’s easy to get off track or distracted.

Fortunately, benchmarking data from the Institute of Finance and Management (IOFM) provides a guide.  It suggests there are five measures of operational efficiency and effectiveness that are most important to achieving best-in-class results.  These metrics will put you on your way to success.

1. Percentage of early payment discounts captured

One of the easiest ways to know whether your accounts payable department is operating at a high level is to measure the percentage of early payment discount offers that your business captures.

Buyers earn an early payment discount of 2 percent on the typical invoice.  The potential opportunity for discounts earned on early payment can grow significantly based on a buyer’s total annual spend.

Best-in-class accounts payment departments capture an impressive 85 percent and 95 percent of early payment discount opportunities, per IOFM’s Is Your AP Performance Top Tier?  However, most accounts payable departments have a lot of room for improvement, especially those that are the least automated.  The average accounts payable department captures 66 percent early payment of discount opportunities, while departments in the bottom quartile capture just 40 percent of opportunities.

2. Number of invoices processed per FTE

Another critical KPI to achieving best-in-class results is the number of invoices processed per FTE (calculated by dividing the total number of invoices processed annually by your total number of FTEs).

A lack of automation has a big impact on staff productivity.  With a significant level of automation – where at least 70 percent of supplier invoices are received electronically and processed using an automated workflow – a single FTE can process nearly 23,000 invoices annually, IOFM finds.  But departments that receive most of their invoices as paper struggle to hit one-quarter of that number.

At a time when departments are being pressured to do more with less, FTE productivity is a key KPI.

3. Percentage of invoices paid on-time

Best-in-class accounts payable departments know that on-time payment of supplier invoices reduces late-payment penalties, decreases inquiries, and strengthens relationships with valued suppliers.

Departments with a significant level of automation pay a lot more of their invoices on-time.

Approximately 29 percent of accounts payable departments with significant automation pay their non-PO invoices on-time at least 96 percent of the time.  But only 13 percent of departments with moderate automation pay their non-PO invoices on-time at least 96 percent of the time, IOFM finds.

4. Average cost to process a single invoice

The average cost to process a single invoice is another key driver of achieving best-in-class results.

IOFM calculates this measure by diving an accounts payable department’s total labor cost by the total number of invoices processed annually.  While this figure does not include all expenses – such as overhead and third-party services – it provides an easy way to compare costs across departments.

The cost differences between departments with significant automation and those with little or no automation is significant.  Overall, there’s a four-fold difference between top and bottom performers, per IOFM’s Is Your AP Performance Top Tier?

In fact, the worst-performing accounts payable departments with significant automation process invoices at a lower cost than top-performing departments with limited automation, IOFM finds.

5. PO first pass match rate

Matching invoices to POs is a key step to improving the speed and accuracy of the invoice approval process.  But the more invoices an accounts payable department processes manually, the harder it is to maintain high first-pass match rates.  Best-in-class accounts payable departments match invoices and POs on the first pass at least 90 percent of the time, IOFM finds.  However, bottom-performing accounts payable departments match invoices and POs on the first pass only 70 percent of the time.

Tracking these KPIs will help your accounts payable department achieve best-in-class results.

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About Canon Imaging Solutions Division

Digital Imaging Solutions, a division of Canon U.S.A. Inc. (CUSA), brings together Canon’s world-class imaging technologies and information management expertise to assist organizations in achieving their digital transformation objectives.  With a focus on innovation, CUSA’s Digital Imaging Solutions’ software development and solutions delivery capabilities scale across several practice areas: Business Process Automation – including Procure-to-Pay & Order-to-Cash automation, Document Solutions, Information Management Services with a focus on content capture, management and collaboration, and Security and Infrastructure Management.  With expertise in emerging technologies such as artificial intelligence, machine learning, and big data analytics, CUSA’s Digital Imaging Solutions division deploys its solutions in partnership with leading technology providers and offers comprehensive consulting and professional services that are trusted by organizations of all sizes. Additional information about the company, its programs and mission can be found at Canon U.S.A., Inc.

KPIs for Accounts Payable