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Accounts payable metrics are standards of measure that depict the efficiency and effectiveness of the accounts payable process, whether it is working towards the goals and objectives of the company. Further, these metrics can also be used to-
There are three categories of accounts payable metrics-
This includes the aspects with regard to the day-to-day operations that are under your control fully, including employees, workflow processes and departments.
Financial metrics are based on a particular department’s actual transactions, including payments, discounts, fees, etc.
The metrics here are regarding your suppliers, the way they fit into the AP workflow process, and the integration of their systems with the ones you have in place.
Invoices are created differently for different purposes. The cost taken to process a single invoice on an average form the base for various calculations such as labour, stationery, accounts payable infrastructure, etc. Identification of all such overheads will help cut down unnecessary and avoidable costs.
The time taken to process an invoice is a very important metric. The longer it takes to process an invoice, the longer valuable resources are blocked from performing menial tasks. This also translates to an increase in labour costs. The average cost per invoice metric must be studied closely along with this metric to ensure improvements overall.
Slow and laboured payment processes will result in delayed payments, which, in turn, subject the business to penalties and interest charges with regard to those delays. The higher the number of delayed payment transactions, the higher the penalties paid by the business. In other words, the business will be bleeding cash on charges that could otherwise be avoided.
Automation of e-invoices will reduce the need for interaction with suppliers. While occasional interactions are encouraged, constant interactions will tie down resources and personnel that could otherwise be contributing to overall business efficiency. Automation also reduces the occurrence of human error. Understandably, the lower the number of enquiries, discrepancies and disputes, the better the efficiency of the business overall.
Tracking your key performance indicators (KPIs) may result in a huge uptick in the efficiency levels of the accounts payables system.
Duplicate invoice payments are a common occurrence. Measuring the number of duplicate payments made by the business helps the business stay alert to matters like double-billing done by a vendor, manipulation of invoice data, etc.
Tracking KPIs is possible once the accounts payables system is automated. In addition to reducing AP costs, automation can improve processing time and accuracy. Metrics such as process bottlenecks, time taken for approvals, data entry done manually, etc., are tracked easily and efficiently with the help of the accounts payable metrics system in place. The more metrics set in place for tracking, the better the data. This enables smarter and more informed business decisions.
Scanning invoices improves verification since the invoices scanned can be verified against the work orders. This ensures that verification accuracy is maintained and any discrepancies found may be corrected at the earliest, thus enhancing the quality of inputs.
Automation of the receipt and filing of invoices ensures that they are fed into the system instantly. This, in turn, speeds up the process and ensures that the inputs are recorded on time.
Automation enables automatic approval from recognised parties, thus cutting process time and improving efficiency. Bottlenecks in the process are reduced drastically, speeding up the quality and accuracy of the entire process. Through automation, processes are streamlined in a manner wherein payments are made on time.
Tracking the KPIs regularly allows the user to identify bottlenecks and stalls in the process, where the problem lies and how quick a resolution for that problem has to be cooked up. Response time is cut down through automation, and information is relayed more quickly.