Evaluating Your Accounts Payable Performance With Key Industry Metrics
Invoice processing is the same whether you are a 100 person company or a Fortune 500: arduous and painful. And, the fact remains that right around 50% of organizations worldwide still rely on a manual process to receive invoices, enter their data into an ERP, approve and finally pay. This fact doesn’t even include those companies who use legacy document automation systems with basic features, which promised efficiency but barely saves time with its limited functionality.
So why is that? The full procure-to-pay cycle is vast and complex, and many organizations who pause to take on the whole “beast”, don’t have the in-house expertise or believe that they just can’t afford an end-to-end solution, the project time or the resource draw.
The first and most important step is to get a snapshot of where you sit today. It’s easy to do that with some benchmarking around key metrics. Below is an initial set of recommended metrics, an average of the typical accounts payable (AP) department and a best-in-class target.
1. Invoice Processing Cost – Many accounting departments have no idea what it costs them to process a single invoice. AP Staff time/wages, late fees, missed early pay discounts and approver time/wages are basic contributors to the process cost, which can balloon with lost invoices and poorly executed processing.
Average Cost per Invoice*: $11
Best-in-Class AP Departments: $2.20
2. Time to Process an Invoice – Just how long, from the time of receipt, does it take you to complete the cycle and pay your vendors? The two main contributors for those without an invoice automation solution are physical invoices that need to be scanned, approvals and the processing of exceptions.
Average Time to Process an Invoice: 10 days
Best-in-Class AP Departments: 2 days
3. Touchless Invoice Processing – The Holy Grail of invoice processing is a touchless process or straight-through processing. That magical invoice that gets processed and placed into the ERP with your data automatically entered and queued for payment. The key is that this happens with minimal to no accounts payable staff intervention.
Average Straight Through Invoice Processing Rate: 30.4%
Best-in-Class AP Departments: 90%
4. Invoice Exception Processing – Exceptions are the painful piece of the AP invoice process, and typically consume the majority of staff time. Wrong totals, missing items and missing vendor or approver information can lead to delays and missed opportunity for time-savings.
Average Exception Rate for Invoices: 25%
Best-in-Class Exception Rate: 10%
How did you rank? Average or Best-in-Class? Here at Ephesoft, accounts payable automation is our most widely used reason for implementing automation around the world. We focus on making the manual invoice processing workflow efficient and accessible: invoice ingestion, data entry and routing. Document and data capture and extraction is an easy win for any AP department. It’s a great first step to improving your accounts payable processing and freeing your staff for more important tasks. Contact us today and ask about Semantik Invoice to leave average behind.
Take the Accounts Payable Health Check! Use this AP benchmark tool to determine where you fit on the invoice processing spectrum compared to others in your industry.
*Statistics courtesy of Ardent Partners Accounts Payable in 2021 report
