AP Automation Metrics – What To Measure And When
There are a few phrases that I use too much. I know this, but they just seem to work for me. Today’s overused phrases of the day is, “you can’t manage what you don’t measure”.
It’s A Good One!
The fact is, the phrase has been over used, but it’s a really good one. AP Automation is no exception to this over used group of words.
What To Measure?
Here is a list of the critical few metrics you should know when you are starting and throughout the life of your AP Automation journey.
- Cost Per Invoice
- New Time
- Cycle Time
- Approval Time By User
- Vendor’s Productivity
- Life Cycle
I believe it’s always a good practice to start with a definition.
- Cost Per Invoice – This report measures the total cost to process an invoice from the time it is received to the time it was entered into the accounting system and filed.
- New Time – This report measures the amount of time that is freed up by AP Automation.
- Cycle Time – This measures the amount of time is takes to process an invoice.
- Approval Time By User – This report will show who is doing certain approvals and how much time it takes.
- Vendor’s Productivity – This report will measure the voids, errors, late fees and missing invoices of a certain vendor.
- Accrual – This shows the invoices that are not approved for a certain accounting period.
- Life Cycle – This report will measure the entire time from contract (PO) to invoice, to accounting system to pay.
Now, this is the tricky part. I have written a lot about this, but I think it is worth repeating. Tracking anything with Accounts Payable Automation is a process not an event. If you run the above reports once you are doing your company a huge disservice. Taking the same list, here are a few good times to run the reports and analyze the results.
- Cost Per Invoice – Before you automate and after you automate. It’s also good to run this one on an six-month ongoing basis.
- New Time – Before you automate. It will help you determine which service provider is the best fit.
- Cycle Time – Every week after being automated.
- Approval Time By User – Every week after being automated.
- Vendor’s Productivity – Once a month. This information will help you spot the problem vendors. It’s much more effective to find and deal with the problem vendors, than treat them all as problems.
- Accrual – End of the month, quarter and year.
- Life Cycle – Once a month. This report will tell you how everything is doing.
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