If you cannot measure something, then you cannot judge how well you are meeting your goals. When evaluating your accounts payable metrics, refer to the business goals to determine your progress toward achieving them.
This mindset can be applied to accounts payable KPI performances because the process consists of multiple moving steps and just as many individuals across the spectrum. It’s critical to identify essential measures of performance and metrics; otherwise, it is inevitable that key components that could otherwise lead to success will be missed. Practically all businesses utilize performance indicators to facilitate their operations and gauge the contribution of each component to the overall success of the business. Accounts payable KPIs are no different.
What Are KPIs in Accounts Payable Outsourcing Services?
Modern finance has evolved several different effective methodologies for measuring accounts payable (AP) metrics. The “KPIs” in “accounts payable KPIs” stand for “key performance indicators.” These performance indicators are ideally measurable data points that are closely connected to the completion of a specific business endeavor.
Ideal accounts payable KPIs need to be time-bound and specific, and all project members must agree. To measure accounts payable performance accurately, one must gauge KPIs on a regular basis. This should occur at least quarterly to ensure that accounts payable metrics align with the project’s goals. Then, if needed, areas of improvement can be identified.
In the event of new technology implementation, a business acquisition or merger, or an organizational restructuring, the changes in the process can only be measured when the relevant accounts payable KPIs are in place.
KPI #1: Cost Per Invoice
Defined as the combined average cost of running one invoice through the business organization, the cost per invoice can depend on several different factors you include in the equation. Sometimes, the cost per invoice of a company may appear deceivingly low. It may not include some hidden costs that can damage profit margins.
A business with a paper-based manual invoice process will want to consider the operational costs and labor, as employees spend a significant amount of time organizing physical documents in a process that is at high risk of human error. The mistakes that surface from manual invoice processing must be taken into proper account. The accounts payable procedure, when including the time invested by business users, will also impact the cost per invoice.
The total processing cost per invoice increases dramatically when additional labor costs are factored in. Aside from staff costs, other common factors that add to each invoice’s cost are:
-Audit fees
-Lost supplier discounts
-Mailing and printing
-Errors in payment
-Equipment systems and their requirements
It has been shown that companies with no or few automated processes spend up to $10 or more for each processed invoice. The best performers only cost $2.07 and can perform the same tasks. Sometimes the cost can be even lower. The average spent across all organizations per invoice is $5.38. The deceitfulness of outcomes comes from the wide spectrum of accounts payable metrics used to calculate it. The performance will be highly dependent on the company’s total number of invoices processed, the type of industry they’re involved with, the system used, the percentage of invoices from actual purchase orders, and the structure of the accounts payable KPIs.
This accounts payable KPI must be used with care. Financial professionals must take heed to concentrate on gauging performance over time instead of comparing it to the performance of external peers. The APP2P Network suggests that the total cost for accounts payable compared with total revenue can be a viable alternative metric to gauge KPIs.
Keep in mind that the purpose of this accounts payable metric needs to be representative of the organization’s objectives. More advanced automation tools are crucial for a company that prioritizes high-touchless invoice processing and for determining how to effectively measure accounts payable performance. This might increase the cost of each invoice in the short term, but in general, all automation protocols that reduce the number of manual steps involved in processing will have an overall lowering effect on cost metrics.
KPI #2: Number of Invoices per AP for Full-Time Employees
This number may not be your top choice for a KPI metric, but it serves as an indication of efficient productivity. Therefore, these accounts payable KPI shouldn’t be ignored. The variable is how an organization measures the volume of invoices. The measurement can be taken daily, weekly, monthly, or annually, varying significantly depending on the type of industry. The easiest way to gauge this KPI is to take the annual volume of invoices and then divide it by the total number of accounts payable related to full-time employees.
Similar to the cost per invoice KPI, this metric can be somewhat tricky and requires careful planning before comparing the result of the above equation with that of industry peers. Although this metric is a fair way to gauge the overall performance of the accounts payable department, the full picture may be obscured when examining the role of accounts payable within the company.
Day-to-day semantics are reduced when processing is automated. The workload on accounts payable can then be easily managed. However, this doesn’t necessitate laying off employees. Several other strategic tasks, such as data management and financial support, can be assigned to reassigned staff who can utilize their knowledge of quality AP resources effectively.
KPI #3: Invoice Lead Time
This accounts payable KPI tracks the overall time required to receive an invoice and complete the processing and finalization stages. The steps to have it made ready for the financial system include:
1) Standardize the data in a format that is digitized.
2) Pair the invoice with supporting documents like a receipt of goods note or purchase orders whenever possible.
3) Assess any discrepancies and approve or deny them accordingly.
4) Code the invoice, and give it to the correct owner of the budget for acceptance.
5) Finish the overall review.
This metric can be easily tracked in your system if the accounts payable department is automated, allowing the full process to be traced efficiently. If certain areas of the procedure fall outside the scope of the accounts payable solution, then the difficulty of obtaining an accurate overall picture increases. However, a slight adjustment to the process can enhance the quality of this KPI.
An advanced automated solution for accounts payable allows benchmarks to display the organization’s invoice expenses across each seven-day cycle. The most skilled companies aim to lower the numbers to below six business days. Ideally, processing a variety of invoice types should take fewer than one day. This is only achievable when an organization has adopted a process that is relatively touchless.
What are KPIs in accounts payable if not a means by which to judge the efficiency and to help spot a means to improve? By eliminating more manual steps, the heaviest lifting is done with record accuracy, and companies save time and money. After implementation, businesses can then redirect resources to value-increasing purposes that drive long-term growth. Contact us for more information about measuring accounts payable performance and KPIs.
Last updated: September 2025