Finance leaders struggled to collect enough data in the past, which meant they only measured what they could — instead of what they should. Thanks to the rapid shift to digitization during the pandemic, data streams have not only become commonplace, but they also allow CFOs the ability to design KPIs that suit their requirements. These can be tailored to deliver results like faster month-end reporting, increased cash flow, or keeping cash on hand to mitigate a potential crisis.
We have three KPIs that will give your accounts payable (AP) team more time back, help save costs, and improve your days payable outstanding (DPO).
KPI 1: Invoice processing time
AP departments have been struggling to process invoices on time during the pandemic. According to one study, it takes approximately to obtain approval for one invoice. Inaccessibility to documents and reliance on informal systems such as emails and spreadsheets contributes to a slow processing cycle, which leads to delayed payments, late fees, missed early discounts, and strained relationships with vendors.
How to calculate invoice processing time: List the date and time when each invoice is received and recorded into the financial system after approvals are complete. Subtract the two dates to find the number of days and record the average across all invoices over a period, e.g., week, month, etc.
Automation solves this: AP automation software, Beanworks offers a functionality to help you identify how much time your AP team is spending on approvals, coding, and other activities. Detailed insight into various functions and workflow can help you track the roadblocks and refine processes for smoother operations. The software also enables automatic approval routine and follow-ups, so your AP team doesn’t have to do the chasing.