The Accounts Payable Report Card: Grade Yourself!

July 28, 2014 Orhan Gazelle

ap-report-card

With manual Accounts Payable (AP) processes, the average and “fully loaded” cost to process an invoice is $14.21, and the average time it takes for AP to handle a single invoice from time of receipt to payment scheduling is 12.4 days. 

It’s time for AP leaders to re-evaluate and grade their performance levels if they want to provide real value in today’s competitive business environment.

In the ePayables 2014: The Quest report, we found that in order to achieve a best-in-class procurement department, it’s key to have real-time, accurate metrics to understand where we are today and how we can create a strategic roadmap for improved efficiencies.

In order to start the process, we must:

  • Understand which metrics we should use to measure AP department’s performances

  • Benchmark AP performance and gain an understanding of how we are performing relative to the average AP department

  • Understand the operational and performance metrics that define best-in-class AP levels

  • Gain deeper insights into the people, process and technology levers that best-in-class procurement departments use to outperform the market

First and foremost, we need to have accurate metrics and benchmark against these measures if we want to gain a real understanding of our relative performance and maturity.  

And when evaluating performance standards and putting processes into place to improve efficiencies, the industry’s average for AP benchmarks to be aware of include:

  • Cost per invoice - $14.21

  • Invoices processed per FTE – 2,308

  • Invoice processing cycle time – 12.4 days

  • Invoice exception rate – 13.1%

  • Straight-through processing – 27%

  • Percent of suppliers submitting eInvoices – 14.8%

  • Percent of suppliers participating in discounting program – 9.9%

Additionally, while more AP departments are now putting into place the right processes in order to add value to the business, performance measurements still present a challenge.  Over 22% of AP departments responded that they lack the ability to track key performance metrics, while more than 16% stated that they opted not to measure their performance.  

As a Data Analyst, this made me cringe in my seat. How can you improve your AP performance if you’re not even tracking your metrics? How can you merely make decisions without any data?

While many forward-thinking AP leaders are starting to re-think AP’s function and deploy P2P solutions to build business value, there still exists a metrics and knowledge gap in today’s AP environment.   

The fact is that AP metrics matter, and without gaining real insights into an organization’s current performance level and benchmarking against the industry’s average, these AP leaders and enterprises will not be able to effectively deploy strategic solutions for continuous improvement.

The ePayables whitepaper is available for free--get your copy here.

 

About the Author

Data Analyst, Taulia

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