It is with great pleasure that Ardent Partners announces the publication of its latest state of accounts payable (“AP”) research report—“ePayables 2015: Higher Ground.” Like the annual reports that came before it, the 2015 ePayables report focuses on the state of the AP function as well as assessing how AP teams leverage ePayables solutions to improve business results and offering up Best-in-Class metrics that allow readers to benchmark their own operations against top performers. (The report is available for download here, here, here, here, and here.)
What are the Four Key AP Metrics to Track?
Tracking performance metrics, and benchmarking the results, is one of the most efficient ways to determine how much room for improvement there is in any business function. This is also true in accounts payable, where tracking key performance metrics can help the AP team understand the current state of operations—a critical part of any business process transformation. After all, without knowing what current performance is, there is no way to tell what will happen when AP automation is implemented.
Not all metrics are created equal, however. There are four AP metrics that collect arguably the most pertinent data for process improvement. This is not to say that other metrics are not valuable, merely that if there are only four metrics the AP team can track, these four should be selected above most everything else. The four metrics are:
- Cost per invoice—The cost to process a single invoice is a key differentiator between high and low performers. In Ardent’s ePayables 2015 survey, the average per-invoice processing cost was $13.47; for top performers, the invoice processing cost sat at $2.94—nearly $11 lower overall. Cost per invoice is important to track because this number is how AP can show hard financial impact. If the cost per invoice declines, then that validates AP’s changes.
- Invoice processing time—Long invoice approval times are indicative of a problem or bottleneck somewhere in the invoice processing phase. Moreover, long approval times mean that there is less of a likelihood to capture certain early payment discounts, which can help the business in the long run.
- Invoice exception rate. Exceptions are the bane of modern AP existence. Whether it is for a missing phone number, or an incorrect street address on an invoice, handling exceptions is one of the key parts of AP’s job. As the AP team becomes more strategic and less tactical, however, it becomes more incumbent on AP to take an active role in supplier files.
- Percentage of suppliers that submit eInvoices—Suppliers are notoriously reticent to transition to eInvoicing technology. The thinking goes that their current system works well enough, so it makes little sense to transition to something new. The higher the number of suppliers that submit eInvoices, the lower the buying organizations cost will be—this ends up being a win for everyone!
Final Thoughts
Tracking performance metrics is a key part of improving AP’s overall operations. By collecting performance data before, during, and after automating the invoice approval workflow, AP is able to showcase the value of investing in the department. If AP teams industry wide were to track these key metrics, they would be able to prove value to the enterprise. Tracking these metrics not only gives the AP team peace of mind, but also allows the organization to see how best to improve the workflow and drive further value.
Check out these related articles for more:
ePayables 2015: AP’s Top Challenge in 2015
ePayables 2015: AP’s Two-Year Goals – Automate More AP Processes
ePayables 2015: AP’s Role in Collaborative P2P
ePayables 2015: Which AP Technologies Hold the Most Interest?
ePayables 2015: What Causes Invoice Exceptions?
ePayables 2015: The Three Most Common Accounts Payable Technologies
ePayables 2015: What is the Biggest ePayables Priority in 2015?
ePayables 2015: 3 Important Accounts Payable Goals for the Next Two Years
ePayables 2015: How Improved Exception Handling Can Drive AP Performance
ePayables 2015: AP’s Top 3 Priorities in 2015
ePayables 2015: Moving From the Tactical to the Strategic
ePayables 2015: Reaching for “Higher Ground” in Accounts Payable
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