The endearing “paper pusher” nickname didn’t come out of nowhere. Accounts Payable has always dealt with very paper-heavy, repetitive processes. More often than not, when a process is established, it stays that way. So, how do you know if your process still makes sense for this day and age?
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With Accounts Payable benchmarking, companies can have more visibility than ever before into inefficiencies and process gaps. Let’s dig a little bit deeper into why AP benchmarking is valuable, how to start measuring your AP efficiency, and if AP automation could help.
Why is AP Benchmarking valuable?
Every internal AP department knows that accounts payable is more than ensuring invoices get paid. The efficiency of your AP processes affects working capital, the cost and effectiveness of the whole P2P process, and relationships with key suppliers.
Here are a few key metrics your department can start measuring to identify where you’re excelling, where you could improve, and if there are any gaps.
1. Average cost per invoice type
Calculating how much it costs your company on average to process an invoice is invaluable insight into how much time your employees are spending on repetitive tasks. If your accountants are processing invoices manually, automating this process could save your company on average 60% and 90% on overall cost per document.
2020 Benchmark: $10.89
2. Average invoice processing time
This metric relates to and affects your average cost per invoice, but it will give you insight into how efficient your invoice processes are overall. In the days of instant transfers and immediate payments, the current benchmark seems like a long time. Your customers and your CPI will benefit greatly by identifying where any bottlenecks are occurring.
2020 Benchmark: 10 days
3. Capturing Early Payment Discounts
Early payment discounts can add up when you are dealing with hundreds or thousands of invoices every month. The sooner you can move an invoice through the system without errors, the more likely you are to capture that. Additionally, this prevents late fees from being charged or damaged vendor relationships.
2020 Benchmark: 31% of businesses saw an increase in early payment discounts
4. Number of supplier inquiries, discrepancies and disputes
Late payments, partial payments, new addresses, returned mail, you name it. Vendors need to communicate with you. Decreasing the amount of those inquiries means a more effective team. So identify where you can speed up processing and decrease errors. However, when mistakes do happen, wouldn’t it be nice if your vendors could find the answer themselves? Many solution providers offer a vendor portal to allow them to check payment status, update their contact information, or message you with other non-urgent requests.
2020 Benchmark: 25% of AP staff time is spent on vendor inquiries
5. Percentage of straight-through invoices
We live in an instantly gratifying digital world. Electronic payments and invoices are becoming the norm, so measuring the percentage of straight-through invoices you’re receiving (and paying) versus manual invoices will make AP and Procurement’s relationship frictionless. Not to mention you’ll reap the benefits of increased cash flow, avoidance of late payments and improved vendor relationships.
2020 Benchmark: 30.4%
Take a look at these benchmarks and compare them with your own team’s stats, and set your goals for 2022. Automating part or all of your process has the potential to save your organization thousands, if not millions, of dollars in labor and resources.
At DataServ, we’re automation experts. Our proprietary processes and technology eliminate human interaction with complex invoice transactions. Let us tailor our accounts payable invoice automation solution to reduce costs, free up your staff's time, mitigate fraud, and streamline processes.
Contact us to get started.