Understanding Key Performance Benchmarks for Accounts Payable Invoice Processing

Understanding Key Performance Benchmarks for Accounts Payable Invoice Processing

Nanoscience notwithstanding, it generally holds true that you can't measure what you can't see. But in accounting and business, the invisible is often hiding in plain sight, and more often than not measurement is a matter of prioritization rather than the need for any sort of specialized analysis. After all, when push comes to shove and resources are spread thin it's the pile of invoices and expense reports that usually gets processed over the housekeeping stuff, right?

While a time crunch may cause you to delay your analysis of key performance indicators and benchmarks, it can't be an excuse for overlooking your metrics altogether. Because for those of us in business, perhaps Peter Drucker said it best: what gets measured gets improved. The implication being that if you're not proactively measuring your accounts payable benchmarks, it's not likely you're able to effectively improve your internal processes and procedures either. And if you're not improving, then…

Of course, a lot more goes into measuring your AP performance than time. You have to know what metrics matter most to your department's output, as well as the KPIs that are most important to the folks sitting in your company's executive suite. To help you get started, earlier this year Certify released a new study of more than 300 accounts payable professionals from outside our customer base to reveal the top AP invoice benchmarks and trends of 2017. We also prepared a new white paper that dives deeper into the results and data from the study. But before you jump into the report, let's quickly review how a few of the key AP performance benchmarks and leading indicators are defined, and what the benefit of a closer look can mean for you and your organization:

  1. Invoice Volume Processed Per Staff Accountant
    In its most basic form, the efficiency of your team can be assessed by the number of invoices each staff member is able to process on a monthly, quarterly and/or annual basis. This metric is not merely a measure of each individual's performance, but it also provides a view into the efficiency of department systems and processes. For example, it's natural to see some variation in individual output based on skills, complexity of invoices processed and other factors. However, if you're seeing an overall lower output or inconsistency across staff and benchmark time periods, your process may be the culprit.

  2. Average Time to Process a Single Invoice
    There are many variables that go into determining the lifecycle of an AP invoice from receipt to issuance of payment. Taken as an average, however, this metric can help you identify potential efficiencies or roadblocks in the process. Reviewing average time to process an AP invoice can also help you better categorize the different types of invoices and payments you're typically managing, so you can identify trends and create secondary measures and benchmarks. Use of automation technology over manual invoice processing can also be key component in this equation. Absent filters for processing technology, 46% of companies in the Certify study report the ability to process a single invoice in 5 days or less.

  3. Average Cost to Process a Single Invoice
    Adding average per-invoice processing cost to your list of benchmarks gives you an executive perspective on your department's bottom line. Calculating invoice volume and average processing time with your department overhead including salary and benefits, operating costs, and office supplies and postage, will show you the hard dollars required for AP invoice processing at your company. What makes for a high-performing average can be guided by industry benchmarks but ultimately has to be determined by internal expectations and norms. For good measure, 50% of companies in the Certify survey reported an average invoice processing cost of $10 or less.

  4. Percent of Electronic Invoices Received
    Why does this matter? The methods in which your vendors elect to submit invoices for payment play a fundamental role in your company's invoice process. Reviewing invoice receipt methods also gives you the ability to compare your performance of invoices processed manually versus electronically, head to head. In addition, understanding the mix of electronic versus paper invoices and any related trends can signal a tipping point that justifies the need for investment in technology, or other necessary changes and additions to department protocol.

  5. Top Goals for Improving AP Management
    While not a true performance metric, benchmarking goals for AP improvement and aligning with your executive team helps set a standard for how your team is evolving to meet the needs of the company overall. It will no doubt change over time, and keeping tabs on top goals will serve as a temperature check on what matters most to help you chart a course for the future of the department. For example, the Certify study found the number one goal for improving AP management in 2017 is faster invoice processing times, ahead of reduced processing costs in the number three spot. So, if faster processing is the identified goal, tactical measures can then be prioritized in the operating plan.

The benchmarks described here are just a sample of what's included in Certify white paper, Understanding the AP Invoice Processing Landscape: Trends and Benchmarks for 2017. If you're serious about improving your AP invoice process, be sure to download your complimentary copy today.