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The Best Way To Improve Accounts Payable Key Performance Indicators
If your company is like most, then Accounts Payable could use some improvement. In some companies, it’s one of the hardest departments to optimize. And even when the AP department is running well, there are still at least a few Accounts Payable Key Performance Indicators (KPI) you could improve on.
More companies than ever before are switching to automatic accounts payable software – and with good reason. Compared to a paper processing system, automated AP streamlines processing, reduces costs, and makes it easier to deal with audits. AP automation also gives you increased insight and control over the accounts payable process, putting all the information about your invoice processing literally just a few clicks away.
As you switch to an automated system like NextProcess’ flexible AP software, you’ll notice it’s easier to track key performance indicators. But that’s certainly not the only change you’ll notice. Many KPIs improve with automation and some of them improve by quite a large percentage.
Invoice Receipt and Processing
With more and more invoices submitted electronically, it makes sense to process them electronically as well. Automatic AP software makes it easy to track invoices and see how your accounts payable department is doing. With a few clicks of a mouse, you’ll be able to look at KPIs like:
- total number of invoices received
- percentage of suppliers using electronic invoicing
- percentage of exception invoices
- exception processing and corresponding reasons
Once you can see KPIs for your invoices, you’re one step closer to controlling cash-flow. Automated AP software helps reduce the number of overdue invoices by keeping track of payment dates. It also lets you see the average cost per invoice, and identify invoice types or vendors that are costing you money with exceptions and non-PO invoices.
Costs Associated With Invoice Processing
Improving the bottom line is one of the main reasons we look at accounts payable key performance indicators. Tracking your KPI makes it possible for you to see where your money is going and find ways to improve. AP automation can help you track:
- average cost per invoice
- average cost to process an invoice by type
- total value of outstanding invoices
Automation software makes it easy to look at information for all the invoices you process and to break the information down by invoice type. It’s often useful to look at how well your department is handling exceptions invoices versus non-PO invoices versus standard invoices. Or to compare invoices from different classes of vendors. The software will also let you easily check on the total value of outstanding invoices so you can track your cash flow more effectively.
Workflow Metrics In The AP Department
Accounts payable automation has the potential to more than double the number of invoices your AP department processes per month. In fact, some departments see a five-fold increase in the number of invoices processed per employee after they start using automation. You’ll see immediate improvement in the following KPIs, and they will continue to improve as your AP department gets used to using the software:
- invoices processed per day
- invoices processed per employee
- percentage of invoices in review
Automated software also helps you track your AP employees’ productivity. Perhaps you’ll find some operators work best on certain types of invoices and that it makes sense to have them specialize on those. You’ll also be able to identify the most efficient and productive people in your department so others can learn from them.
Managing Approvals and Payments
Paying invoices is a key purpose of the accounts payable department. So it makes sense to look at KPIs in your accounting department that relate to payments. You’ll need to examine what’s working as well as what isn’t, such as:
- automated and/or electronic payments as a percentage of total payments
- average time from receipt to payment
- erroneous payments as a percent of total payments
The tools included in AP software give you a big-picture look at how long it takes to move an invoice from receipt to approval to payment. And using your automated system to track key performance indicators for your payment system also helps you identify payment problems so you can deal with them.
Fix Issues and Save Money
NextProcess’ accounts payable software is tailored to your processes and reduces costs as soon as it’s implemented. The software also makes it easier to address and fix issues having to do with erroneous data entry and/or payments. With automatic AP, you can improve accounts payable KPIs including:
- discounts captured as a percentage of discounts offered
- percentage of problems attributed to human error
- number of duplicate, late, or erroneous payments
- number/percentage of overdue invoices
AP automation immediately boosts KPIs having to do with money lost through late fees or missing discounts that would have been available for paying early. Because data entry happens automatically, there’s also a reduced risk of human error when capturing information from incoming invoices. And since everything is tracked and processed automatically, it’s also easier to catch duplicate and erroneous payments early, or even prevent them in the first place.
If you’re ready to see improvement in your accounts payable key performance indicators through automation, get in touch with us. We’ll answer any questions you have, set up a free demo, and guide you through the set-up process.