An efficient Accounts Payable (AP) department is invaluable for an organization. It plays a critical role in maintaining healthy supplier relationships, managing cash flows, and contributing to cost savings. However, the manual processes in most organizations often make the AP function more transactional and less strategic. To shift towards a more strategic business role, AP leaders need to overcome challenges, and the Accounts Payable KPI dashboard is a crucial tool to assist the AP team in monitoring key metrics, identifying problems, and ensuring that the AP process runs efficiently.

Here’s the revised version of the content with a Key Takeaways section at the beginning:

Key Takeaways:

• Manual AP processes hinder strategic business operations and lead to inefficiencies like missed discounts and cash flow mismanagement.
• An Accounts Payable KPI Dashboard helps monitor critical metrics like Days Payable Outstanding (DPO), payment errors, and processing costs.
• Automating the AP function reduces costs, improves operational efficiency, and strengthens vendor relationships by reducing manual errors.
• AP benchmarking and key performance indicators (KPIs) can highlight areas for improvement and help secure cost-saving opportunities.
• Real-time insights from AP dashboards drive better decision-making, leading to optimized cash flow management and stronger supplier relations.
• Advanced solutions like Zycus’s e-Invoicing solution streamline processes, ensuring timely payments and improved accuracy.

The Importance of Effective Accounts Payable Management

The Accounts Payable (AP) department is responsible for ensuring that invoices are paid on time, and vendors remain satisfied. Yet, the AP function can also significantly enhance company efficiency. An ineffective AP process can lead to:

• Missed discounts on payment terms
• Delayed invoice processing
• Mismanaged cash flows
• Increased costs due to inefficiencies in invoice processing

Read more: Top 5 proven accounts payable best practices

Common issues include manual, error-prone AP processes, the failure to confirm matches among purchase orders (POs), invoices, and purchase requests, and missing out on early payment discounts due to extended payment cycles. Moreover, organizations often lack processes to prevent late payments, overpayments, and duplicate or missed payments, all of which affect cash flow and supplier relationships.

Key Accounts Payable KPIs to Track

Closely monitoring KPIs is vital for any AP function. An Accounts Payable KPI Dashboard should include the following KPIs to analyze and address any problems or emerging trends:

• Total Accounts Payable: Displays current and historical data on the AP balance.
• Current Accounts Payable: Total value of due supplier payments divided by the overall balance of AP.
• Overdue Accounts Payable: Percentage of overdue payments relative to the total AP balance.
• Accounts Payable Aging: Monitors the pace of cash outflows and unpaid invoices.
• Days Payable Outstanding (DPO): Measures the time it takes for a company to pay its vendors on credit. A higher DPO allows the company more cash flow for operations.
• Accounts Payable Process Cost: The average cost per invoice, factoring in labor, system costs, and overhead.
• Average Time to Pay Invoices: The time between invoice receipt and payment.
• Payment Errors: Tracks issues like incorrect payments, duplicates, and incorrect vendor information as a percentage of total invoices processed.

Read more: Measuring Your Accounts Payable Effectively: Operational Metrics

AP benchmarking measures AP functions against industry peers to identify improvement areas. Enhanced benchmarking positively impacts supplier relationships, ensuring organizations can secure discounts on early payments and optimize cash flow management.

Five Critical AP KPIs for Benchmarking Success

• Cost Effectiveness: Measures AP operating costs to ensure profitability. This KPI helps calculate the average AP operating cost per unit processed.
• Invoices Processed per FTE: An indicator of team efficiency. Companies that use AP automation can process a significantly higher number of invoices per full-time equivalent (FTE).
• Percentage of Discount Lost: Tracks missed discounts and encourages faster processing to secure available discounts.
• Number of Discrepancies and Disputes: Reflects the efficiency of the AP team in managing queries and resolving discrepancies.
• Vendor Payment Errors: A critical KPI that measures the accuracy of transactions and the effectiveness of minimizing manual payment errors.

The Benefits of Automating Accounts Payable

By automating AP processes with advanced technologies like Artificial Intelligence (AI), organizations can significantly reduce costs, enhance efficiency, and allow the AP department to adopt a more strategic role within financial operations. Automation streamlines tasks, reduces manual intervention, and enhances the accuracy of payments, ultimately leading to fewer errors and disputes.

Adopting advanced tools like Zycus’s e-Invoicing solution can transform manual processes into automated, error-free systems that boost productivity and ensure timely payments.

An Accounts Payable KPI dashboard provides real-time insights into these metrics, enabling businesses to maintain better control over the AP process. These insights are invaluable for strategic decision-making, helping companies optimize cash flow management and strengthen their financial performance.

5 Accounts Payable Key Performance Metrics (KPIs) to Track Accounts Payable Efficiency

Cost Effectiveness

Out-of-control AP operating costs will erode your profitability and powerfully impact your cash flows and working capital management. Therefore, it becomes imperative to monitor the AP operating cost.

Avg. AP operating cost per unit= Total operating cost divided by the number of invoices processed.

The lower the avg. operating cost per unit, the better the performance of the AP function.

For example- if the total AP Operating cost is $100,000 and the team processes 10,000 invoices on an average every month, the avg. operating cost will be = $100,000/10,000= $10 per unit.

This cost can then be compared to IOFM benchmarking report, which reports that AP teams with best–in–class organization process invoices at $2.02 /unit, while the median cost per invoice is $5.71.

Avg. operating cost/invoice may be misleading if the total invoices processed include many Non-PO invoices and exceptions.

Read our blog: Why the Accounts Payable Turnover Ratio Matters for Your Business

Invoice processed per FTE

This metric helps to gauge the efficiency and productivity of your AP team.

Invoices processed per FTE= Total invoices processed/ total number of FTE employed.

As per the Hackett group, highly- productive AP teams can process 23000 invoices per FTE, whereas an avg. team can process only 6082 invoices per FTE.

This also can be attributed to more manual processes than AP automation.

The best-performing organizations apply automation to process invoices using an automated workflow to improve staff efficiency.

Percentage of discount lost.

It is one of the most crucial KPIs that leads to revenue loss.

Percentage Of Discounts Lost = Total transactions where discounts were not captured divided by Total trades where suppliers offered discounts

The lower this score, the better it is. The business needs to analyze this KPI to improve their invoice processing faster to capture discounts wherever possible.

Number of discrepancies and disputes

If an AP team spends significant time resolving discrepancies and queries, the AP team needs to be more efficient. It can’t create value. According to Ardent Partner’s AP metrics report, AP staff spends 22% of their time resolving queries.

To minimize the time AP teams spend answering queries, the organization can use AI-led accounts payable automation tools like a brilliant desk that can check the intent of all questions in the mailbox using AI and reply to them, accordingly, thus freeing up the precious time of the AP team. In addition, the automation will also help in 2- 3-way matching invoices for faster payments and eliminate the risk of duplicate invoices and payments.

Vendor Payment Errors = Erroneous transactions divided by the total number of transactions over the same period.

A significant reason behind vendor payment errors is the deep-seated practice of organizations to make manual payments. According to Ardent Partners’ Accounts Payable Metrics Report, 43% of B2B payments are still made manually. Manual payments are prone to human errors and unnecessarily increase invoice cycle time.

Organizations should integrate their AP with upstream data to improve this KPI and use electronic payment methods for faster payments.

Invoice exception rate

When an invoice misses essential details like incorrect vendor name, vendor data, or routing errors, it causes unnecessary delays at the AP process end.

Invoice Exception Rate = Invoices flagged for an exception divided by total invoices received in a period.

According to Ardent Partners AP metrics, 24.6% of invoices are flagged for incorrect details/exceptions. This causes delays at the AP process team’s end as they have to perform additional work to get the invoices rectified or approved for exceptions. This eats to the value able time, which could have been used for strategic purposes to achieve company goals.

By automating the AP process, organizations can reduce the invoice exception rate as the system would do a 2-3way matching of the invoices with PO and send instant alerts in case of any exceptions.

Accounts Payable KPI Dashboard

Setting up a new Accounts Payable KPI dashboard requires forethought and planning to provide the most valuable information for each user efficiently and intuitively. Here is a sample template that can be used

Use the template AP Dashboard.xlsx

Conclusion: Turning Accounts Payable into a Strategic Asset

To thrive in today’s business landscape, organizations must move beyond transactional AP processes and elevate the role of Accounts Payable into a more strategic function. Leveraging an Accounts Payable KPI Dashboard allows organizations to track performance metrics, optimize workflows, and drive cost efficiencies. Furthermore, automating these processes helps companies unlock valuable time, reduce errors, and take advantage of early payment discounts, which, in turn, improves supplier relationships and supports a healthy cash flow.

Ready to revolutionize your AP processes and unlock cost-saving opportunities? Schedule a demo today to discover how Zycus’s solutions can help streamline your Accounts Payable management.

FAQs

Q: What is an Accounts Payable KPI Dashboard?

An Accounts Payable KPI Dashboard is a visual tool that displays key performance indicators to help monitor and manage the efficiency and effectiveness of the AP process.

Q: Why are KPIs important in Accounts Payable?

KPIs are essential in Accounts Payable because they provide measurable metrics that help organizations assess performance, identify areas of improvement, and ensure timely payments to vendors.

Q: What are some common KPIs featured in an Accounts Payable Dashboard?

Common KPIs include invoice processing time, payment accuracy, the number of invoices processed per period, and Days Payable Outstanding (DPO).

Q: How can an Accounts Payable KPI Dashboard improve financial management?

An Accounts Payable KPI Dashboard offers real-time insights into cash flow, payment cycles, and operational efficiency, thereby supporting better decision-making and cost control.

Q: What tools or software are used to create an Accounts Payable KPI Dashboard?

Common tools and software for creating an Accounts Payable KPI Dashboard include Microsoft Excel, Tableau, Power BI, and specialized accounts payable management software.

Related Read:

1. Measuring Your Accounts Payable Operational Metrics Effectively
2. Transforming AP: Collaboration Connects Accounts Payable to Strategic Business Processes
3. Accounts Payable – Central to Strategic Financial Reporting
4. Accounts Payable – A Strategic Business Value Driver
5. How to Increase Accounts Payable productivity Without Increasing Headcount
6. Zycus Enables Home and Office Product Manufacturer to Slash Cost per Invoice by 62%
7. Three ways AP automation can help organizations reduce costs
8. Reduce the invoice processing time to less than 5 days
9. Setting Up Internal Controls in Accounts Payable Processes
10. Top 7 reasons to Digitize Accounts Payable
11. 5 Key Benefits of Enhancing Your Business with an e-Invoice Generation Tool