Accounts payable executives and professionals can gain a rewarding and strategic outcome if they understand the inherent value in AP mastery, push the envelope regarding innovation, and serve as a hub of efficiency and intelligence in the months and years ahead. To achieve these objectives, today’s AP departments must follow the course developed by Best-in-Class organizations and the accounts payable programs they have cultivated by building on core competencies and capabilities, cash management approaches, supplier management principles, and intelligence-led strategies.
Examining AP Performance
The measurement of key performance metrics is an important part of understanding any business function, especially accounts payable. The following are some insights that spring from metrics, such as cost to process a single invoice, time to process a single invoice, invoice exception rate, invoices processed “straight-through,” average percentage of suppliers able to send electronic invoices, PO-based invoices, and Staff time managing supplier inquiries.
- The average AP organization spends $9.40 to process a single invoice (the all-inclusive staff and operating costs that cover receipt, processing, and approval, as well as salaries, benefits, technology, overhead, etc.). However, when multiplied by the hundreds, thousands, or tens of thousands of invoices processed each month, enterprises of all sizes (including small and mid-sized) are spending sizable dollars to manage their invoices. The average cost to process an invoice has dropped sizably in recent years; there is still plenty of room for improvement.
- The average AP organization takes 9.2 days to process a single invoice. While continuing to improve each year, the overall industry still takes considerably too much time in the process. Recall that 41% of AP leaders (see Figure 3, page 9) state that they experience bottlenecks and value erosion because their invoice and payment approvals take too long. Lengthy approval times indicate opportunities to digitize a higher percentage of invoices and serve as a reminder of how critical speed is to the AP operation. The quicker an invoice gets processed, the earlier it is noted as a financial liability by the accountants, providing more time to determine how and when to pay it. And since money never sleeps, AP teams need to push forward and reduce this metric over the next 12 months.
- Invoice exceptions rates have dropped dramatically to 14% in 2024. This represents a significant gain for those AP teams that aspire for greatness and anticipate a more strategic role within the organization. Invoices that are flagged due to coding errors, missing information, approval bottlenecks, lack of purchase order data, etc., all bog down the AP staff. The time spent addressing invoice exceptions can be better utilized for advancing the function forward in innovative and more strategic ways. While invoices remain the bane of AP’s existence, the current year’s gains are impressive … push for more!
- Straight-through processing (32.6% of all invoices) remains a primary goal for all AP organizations. Processing invoices in a “straight-through” manner without human intervention represents the desired future state for AP. All AP groups should have this metric as a key performance target each year.
- The average percentage of suppliers able to send electronic invoices has increased to 48.8%. By encouraging suppliers to transition to digital invoicing, organizations can significantly reduce manual errors, streamline invoice processing, and improve overall operational effectiveness.
- PO-based invoices (61%). This metric represents a win for procurement by helping to reduce or control maverick spending and a win for AP by streamlining the reconciliation and approval process.
- Staff time managing supplier inquiries (21.8%). Spending more than 20% of overall staff time managing supplier inquiries continues to indicate that greater levels of invoice and payment automation are needed.
Paper vs. Electronic
In Ardent Partners’ 19th annual survey on the state of ePayables, electronic invoices and payments once again trump their paper counterparts in overall volume. This is great news for AP staffers and stakeholders because Ardent Partners research has shown that the primary obstacles to reducing processing costs and improving AP performance are paper-based invoices and payments that require manual handling. These include invoices received through mail, fax, PDF, and email attachments and manual/paper-based checks. Overall, electronic invoices account for 51.2% of all invoices received by the average enterprise. Ardent defines electronic invoices as those originating and remaining in digital format, without the need for scanning or data capture support.
Likewise, ePayments have gained some momentum recently and now constitute 68.3% of all payments made by the average enterprise. While paper checks are still common in some regions, they are gradually being replaced by ePayment methods such as ACH, payment networks, commercial cards, virtual cards, and wire transfers. These alternatives not only reduce costs but also enhance visibility, control, and accuracy in the vendor payment process. More enterprises are now prioritizing their payment processes as part of AP/P2P transformation initiatives. These efforts occur alongside the emergence of new technologies, platforms, and strategies, highlighting the growing significance and impact of ePayments in overall business operations.
