KPIs, or key performance indicators, are a fixture of the accounting world. These statistics let managers know how well their accountants are performing. Companies with an automated AP (accounts payable) system should continue checking the KPIs to ensure that this system is functioning properly. The most important KPIs for automated AP systems include the following:
- Invoice exception percentage
- Rate of invoices linked to a purchase order
- Number of invoices each accountant can process per day
- Processing time per invoice
- Processing cost per invoice
The following article provides an overview of crucial KPIs for automated AP systems.
The invoice exception percentage is the most important AP automation KPI. An invoice exception is a general term that describes any problem with processing the invoice. Payments not approved on time or routing errors often lead to such problems. A single invoice exception costs an organization a lot of time to fix, especially if it needs to be clarified what the source of the issue is; obviously, it is important to keep the invoice exception percentage as low as possible. Using an automated AP system cannot only help avoid invoice exceptions, but it can also provide detailed info about any issues that do crop up.
Purchase orders are only sometimes directly associated with invoices. However, it makes things much simpler for the accounting staff if as many invoices as possible are linked to purchase orders. It is a good idea to make the rate of invoices related to a purchase order one of the accounting department’s KPIs. This will allow the business to see areas where they could make their accounting practices more accurate and efficient. Of course, an automated AP platform can automatically link invoices and purchase orders, which would instantly make any business’s accounting practices more efficient.
It is important to evaluate AP professionals based on several KPIs. Of course, it is important to keep track of how many errors each accountant makes. However, it is also vital to keep track of how many invoices each AP professional process per day. This allows businesses to reward exceptionally productive employees and support less effective employees.
Not only will this KPI allow companies to evaluate employees, but it will also allow them to evaluate their vendors. Businesses can check which vendor’s invoices take longer to process than they should. In this way, companies can work with vendors to make invoice processing more efficient and quicker.
All companies with an AP department should track how long it takes staff members to process each invoice. This KPI allows companies to take a closer look at several different statistics. For instance, businesses can identify which process needs to be streamlined and shortened.
If paying the invoice takes less time, companies may need to use a different payment method. It may be necessary to retain the staff member who handles this aspect of the process if the payment method is not a problem. Quicker payments would allow the company to take advantage of more early payment discounts. It would also enable businesses to maintain a positive relationship with their vendors. This could result in vendors offering more favorable payment terms in the future.
Time is money for every business. This means the processing time per invoice and processing cost per invoice KPIs are closely related. While it may be possible for businesses to manually calculate how much it costs them to process each invoice, an automated AP system makes tracking this KPI much easier.
Some businesses may only consider how much they must pay their employees to process each invoice. While this is certainly one of the most important factors in invoice processing cost, there are other factors too. Companies also need to consider the tech cost required to process every invoice. Finally, it is also important for businesses to keep track of fees associated with the payment method they use for each invoice.
More and more businesses are switching to automated AP systems for a good reason. As a result of these systems, there are no human errors. They also make it simple for businesses to process invoices more quickly than they could if they were doing things manually. Automated AP systems can help companies to save a great deal of time and money.