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4 Must-Measure KPIs for an Accounts Payable Staff!

4 Must-Measure KPIs for an Accounts Payable Staff!

Sophia Nora1328 21-Nov-2019

Efficient tracking of Accounts Payable KPIs can help to identify operational inefficiencies and weak points. Metrics give you a better idea of where your accounting is headed and what decisions you have to make going forward.

Important KPIs for accounting departments to draw meaning from your data and strengthen your process.

  1. Cost Per Invoice Processed

Per invoice processed, businesses spend approximately $7.75. For a single end-to-end processed invoice, bottom performers will dole out a minimum of $10; says other industry calculations.

Consider the formula for calculating this KPI:

Per Invoice Processed Cost = Total cost of accounts payable/total number of invoices processed

The factors that go into ‘total cost of accounts payable’ include-

  1. Labor Costs: It is one of the largest organizational expenses and is determined by the number of employees in the department, their wages and benefits, and the hours they work. 
  2. Infrastructure Costs: It includes the tools and equipment required to process an invoice, such as the cost to maintain and buy AP software, hardware, and other accounting tools utilised. 
  3. Office Supplies: This includes envelopes, paper, pens, stamps, and more that make up your office supply expenses.
  4. Parcel Service and Postage Fees: This is the parcel fees required to ship the invoices in bulk to decentralised organisations using UPS or FedEx. 

  2. Average Time Per Invoice Processed

Complicated routing workflows can create headaches for all in the department and hence, it is important to eliminate the lag caused in invoice processing by the following factors- 

  • Slow invoice coding: Lagging invoice coding can be caused by correcting erroneous information using legacy software. 
  • Delayed verification: Lag time can occur if the invoice reaches the appropriate personnel but sits unapproved on the desk for days. 
  • Backlogged invoice closeouts, postings and filings: If siloed from the beginning, the entire end-to-end invoicing process can shutter to a halt.

   3. Total number of Invoices Processed Per Employee Per Day

It is a key KPI and businesses can use this general formula to calculate the number of invoices processed per employee, per day:

Total number of Invoices Processed Per Employee, Per Day = Number of invoices processed per month/number of clerks or full-time equivalents (FTEs) processing them

   4. Percent of Invoice Exceptions

Reflected in KPIs, invoice exceptions can drag down both employee morale and processing efficiency. AP invoice exceptions include: 

  • Purchase order discrepancies such as mistyped supplier zip codes or wrong supplier codes and receipt dates.
  • Duplicative or Erroneous PO and non-PO credit amounts

The discrepancies can be reduced by tracking invoice exception rates. Solutions can be: 

  • Addressing wrong payment rates: Compared to the percentage of total payments, keep a check that erroneous payments should be few.
  • Improving manual re-keying rates: If you review your manual inputting data through AP software tracking features or form ledgers, instances of manual re-keying can be cut.
  • Tracking most frequent exceptions: Know your most common exception types to address their sources and discover suppliers or vendors causing most errors.

How Can Accounts Payable Automation Improve KPIs?

AP automation software can help in the following ways- 

  1. Automatically code vendor invoices which includes general ledger coding obtained from purchasing data for purchase order (PO) invoices and general ledger (GL).
  2. Respective individuals are informed at appropriate time by the software at each workflow stage that it is their turn to review.
  3. AP automating software collects all the transactional data and identifies errors, then alerts clerks to correct the information.
  4. All documents are in one system, following one set workflow. Hence, simplifying invoice audits and approvals. 

How outsourcing help you in maintaining accounting data and its management?

  1. Outsourcing companies allow you to share every document online.
  2. Once the data is received, they check its adequacy and then process it in the accounting data management software of your choice.
  3. Processed data is reviewed again by expert staff.
  4. Once the data is reviewed, it is delivered to you in your desired format.
  5. Hence, outsourcing invoice data entry could be a suitable choice as it ensures accuracy, eliminates the need to hire on-board staff, and lets you get access to experienced professionals. 

Conclusion 

Improving the Accounts Payable system is about more than just tracking broad KPIs. Collecting data for the sake of it does not help your business grow. Right metrics are required to be applied in the right places to see the results. 


Born in New York, USA. Love to do research and write on different B2B subjects.

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