One of the best ways to measure your A/P team’s success is to look at benchmarks and see how your operations compare to your peers’.
And you can do just that by reviewing and sharing the latest annual numbers, outlined in Ardent Partners’ Accounts Payable Metrics that Matter in 2021. Here are some of the highlights:
1. Cost per invoice (CPI)
In 2020, the average cost to process a single invoice – including labor, overhead and technology – was $10.89.
Of course, CFOs know that digitizing the invoice process is the best way to lower costs. But if full-scale automation isn’t possible, consider whether there are specific parts of the process you could speed up.
For example, you may not have the budget for an end-to-end solution, but do you have the capital to automate the invoice and P.O. match? That would reduce the amount of time dedicated to one particularly detail-oriented step, helping get your CPI closer to (or below) this A/P benchmark.
2. Invoice processing time
When looking at how long it took A/P to process a single invoice in 2020, the average was 10 days.
In the age of same-day payment capabilities and instant gratification, 10 days seems like a long time. So, encourage your A/P team to identify where the biggest bottlenecks occur. Are they often waiting on approvals? Are workflows bogged down, so Purchasing and A/P can’t exchange messages and documents quickly? Once A/P identifies bottlenecks, they can work to address them and reduce overall processing times.
3. Invoices received electronically
Electronic methods are just edging out manual methods in the latest A/P benchmarks. In terms of invoice count, 51% of invoices were received electronically, while 49% were received manually. And in terms of vendor count, about 31% of vendors sent invoices electronically, while about 69% of vendors sent invoices manually.
Since less than a third of vendors currently send e-invoices, your staff should think about reaching out – especially to vendors that send the most invoices – to see when and if they plan to switch. Who knows? Some might still send invoices manually simply because that’s what they’ve always done for your company. Remind A/P to let vendors know your company’s willing and able to help with any transitions.
4. Payments sent electronically
Just as e-invoices took the lead, e-payments also beat out their manual counterpart. Last year, 57% of payments were sent electronically, while 43% of payments were sent manually.
The COVID-19 pandemic caused operations to shut down and offices to close, making it harder for companies to cut and mail paper checks. But vendors were eager to get their hands on payments, even if that meant trying new electronic methods. Your A/P team will want to ride that wave into 2021, advising vendors to switch to safer, faster and more streamlined payment methods, like ACH.
5. Invoice exceptions
2020 was a complicated year. And according to these A/P benchmarks, it included a lot of behind-the-scenes invoice work. About 25% of invoices were flagged for exceptions last year. In other words, one in four invoices required A/P to put in some extra work to get to the payment stage.
Talk about time wasted! If A/P doesn’t already, it’d be a good idea for them to start tracking exceptions in software, a spreadsheet, etc. Doing so can help your staff see the big picture: What type of exceptions do they see most often? Are certain vendors more culpable than others? Armed with this insight, A/P can work to put procedures in place to reduce exceptions, saving everyone time and headaches.