Top 10 accounts payable metrics to measure in 2024

You know the feeling of always juggling invoices, payments, and vendor relationships. It’s a lot to manage, and keeping everything running smoothly can feel like a never-ending task.
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Tracking the right metrics can make this process a lot easier. By focusing on specific accounts payable metrics, you can gain insights that help streamline operations and save money.
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Let's dive into what accounts payable metrics are and why they matter.

What are accounts payable metrics?

Accounts payable (AP) metrics are quantitative measures used to evaluate the efficiency and effectiveness of your accounts payable processes.
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Managing accounts payable involves numerous moving parts, from processing invoices to handling vendor relationships. Without clear metrics, it's hard to pinpoint where things might be going wrong or how you can improve.
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Understanding the full cycle accounts payable process can help you grasp the importance of these metrics and how they fit into your overall financial operations. When choosing the best AP automation software, they should have the ability to measure these metrics.

Categories of AP metrics

Operational measures focus on the internal processes of the AP department. These metrics track the efficiency of tasks like invoice processing, approval times, and the workload of AP staff. Examples include the average time to process an invoice and the number of invoices processed per full-time employee.
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Financial metrics measure the financial impact of the AP processes. These metrics help assess costs, savings, and financial performance. Examples include the average cost per invoice, the percentage of early payment discounts captured, and the percentage of late payments and penalties incurred.
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Supplier metrics evaluate the relationship and interactions with vendors. These metrics help ensure that supplier relationships are managed effectively and that any issues are promptly addressed. Examples include the number of supplier inquiries and disputes, and the terms of supplier payment agreements.
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Understanding and tracking these categories of AP metrics can provide a comprehensive view of your AP department’s performance, helping you make data-driven decisions to improve efficiency and financial health.

Top 10 accounts payable metrics every finance leader should track

Average cost per invoice

Tracking the average cost per invoice helps you understand the expense involved in processing each invoice. This includes labor, technology, and other overhead costs. For example, if your company processes 1,000 invoices per month at a total cost of $10,000, the average cost per invoice is $10. Lowering this cost through automation or process improvements can lead to significant savings.

Average invoice processing time

This metric measures the time taken from receiving an invoice to making the payment. A shorter processing time reveals a more efficient AP process. For example, if your average processing time is 10 days, but industry benchmarks are around 5 days, you have room for improvement. Reducing this time can improve cash flow and vendor relationships.

Percentage of invoices processed straight-through

Straight-through processing refers to invoices that go from receipt to payment without manual intervention. A higher percentage means fewer errors and less manual work. For example, if 70% of your invoices are processed straight-through, it shows a high level of efficiency. Increasing this percentage can reduce processing costs and errors.

Number of invoices processed per full-time employee

This metric evaluates the productivity of your AP staff. If one full-time employee processes 500 invoices per month, you can compare this to industry standards to measure efficiency. Higher numbers indicate better productivity, while lower numbers suggest a need for process improvements or additional training. Implementing an invoice tracking system can improve this metric by providing real-time visibility into invoice statuses.

Invoice exception rate

The invoice exception rate measures the percentage of invoices that require manual intervention due to errors or discrepancies. For example, if 10% of your invoices have exceptions, it indicates potential issues in your invoicing process. Reducing this rate can streamline operations and reduce the workload on your AP team.

Percentage of early payment discounts captured

This metric tracks the proportion of available early payment discounts that your company captures. For example, if you capture 80% of available discounts, it shows effective cash management. Increasing this percentage can lead to cost savings and improved vendor relationships. Using payment management software can help you better manage and capture these discounts.

Percentage of late payments and penalties incurred

Late payments can result in penalties and strained vendor relationships. Tracking this metric helps you understand the financial impact of late payments. For example, if 5% of your payments are late, it indicates inefficiencies in your AP process. Reducing this percentage can save money and improve vendor trust.

Number of supplier inquiries and disputes

This metric measures the volume of inquiries and disputes from suppliers regarding payments. A high number of inquiries can indicate issues with your AP process. For example, if you receive 50 supplier inquiries per month, it suggests potential problems with invoice accuracy or payment timeliness. Reducing this number can improve supplier relationships and operational efficiency.

Supplier's payment terms

Understanding the average payment terms you have with suppliers helps manage cash flow. For instance, if your average payment terms are 30 days, but some suppliers offer 45 days, you might negotiate better terms to improve cash flow. Tracking this metric ensures you improve payment schedules to benefit your company.

Return on investment (ROI) of AP automation

Measuring the ROI of AP automation involves comparing the costs of implementing automation with the savings and efficiencies gained. For example, if you invest $50,000 in automation and save $100,000 in processing costs annually, the ROI is 100%. High ROI shows successful implementation and significant benefits from automation.

How to measure and improve accounts payable performance

To make meaningful improvements, you need to know where you stand. Setting benchmarks and identifying inefficiencies are crucial first steps.

Establishing AP performance benchmarks

Start by setting clear benchmarks for your accounts payable processes. These benchmarks serve as a standard to measure your current performance and identify areas needing improvement. Common benchmarks include average invoice processing time, cost per invoice, and the percentage of invoices processed without manual intervention. Use industry standards and historical data to set realistic and achievable targets. Learn how to perform accounts payable duties effectively to set accurate benchmarks.

Identifying areas for improvement

Once benchmarks are in place, analyze your current accounts payable processes to pinpoint inefficiencies. Look for bottlenecks in invoice processing, high exception rates, or frequent supplier disputes. Identifying these areas allows you to focus your efforts on the most impactful improvements.

Implementing process optimizations

Streamlining invoice receipt and data entry

Simplify the way invoices are received and entered into your system. Use electronic invoicing to reduce manual data entry and minimize errors. Implementing a centralized invoicing system ensures all invoices are captured and processed consistently. This step speeds up the initial stages of invoice handling and reduces the risk of lost or misplaced invoices. Understanding the invoice processing steps can help you streamline these tasks effectively.

Automating invoice matching and coding

Automate the matching of invoices to purchase orders and receipts. This reduces the time spent on manual verification and decreases the likelihood of errors. Automated coding of invoices based on predefined rules ensures consistency and accuracy in your financial records. Automation free up your staff to focus on more strategic tasks. Setting up an automated workflow for invoice approvals can significantly improve this process.

Enabling mobile approvals

Allowing mobile approval speeds up the invoice approval process. Decision-makers can review and approve invoices from anywhere, reducing delays caused by waiting for in-office approvals. Mobile access ensures that invoices move through the approval chain quickly, helping you meet payment deadlines and capture early payment discounts.

Using early payment discounts

Take advantage of early payment discounts offered by suppliers. Set up your accounts payable system to prioritize invoices with available discounts. This not only saves money but also strengthens your relationships with suppliers. Ensure your team is aware of these opportunities and has the tools to act on them quickly. Using payment management software can help you better manage and capture these discounts.

Track progress with AP dashboards and analytics

Use dashboards and analytics to monitor your accounts payable performance in real time. Dashboards provide a visual representation of key metrics, making it easy to track progress against your benchmarks. Analytics tools help you identify trends and patterns, offering insights into areas that need further improvement. Regularly reviewing these metrics keeps your team focused on continuous improvement and helps maintain high efficiency in your accounts payable processes. Conducting an accounts payable audit can also ensure accuracy and compliance.

Improve your accounts payable with Ramp

Ready to take your accounts payable efficiency to the next level? At Ramp, we specialize in automating and streamlining financial processes, helping you save time and reduce costs. Our comprehensive suite of tools, including corporate charge cards, expense management, and bill payments, integrates seamlessly with your existing systems to enhance productivity and accuracy.
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Join over 25,000 businesses that trust Ramp to modernize their finance operations. Discover how our innovative solutions can transform your accounts payable processes and drive your business forward. Request a demo or get started.