7 Accounts Payable KPIs CFOs Must Track to Optimise Its Efficiency

“Progress is made where progress is measured.” 

With growing demands on finance teams, CFOs are constantly looking for ways to make every process as efficient as possible—and accounts payable (AP) is no exception. While traditionally seen as a back-office function, AP holds untapped potential to drive savings, optimise cash flow, and support strategic goals—if managed with the right metrics.  

The key to transforming AP from a cost center into a value-driving powerhouse lies in tracking critical accounts payable KPIs. But with numerous metrics available, which ones truly make a difference?  

Here, we will dive into the 7 key accounts payable KPIs that will help CFOs boost efficiency, optimise cash flow, and turn the accounts payable department into a real asset for the company. 

Accounts Payable KPI #1: AVERAGE PROCESSING COST PER INVOICE 

Although this is an obvious and number one AP metric when it comes to invoice processing, it isn’t an easy one, considering the number of steps involved. This key productivity metric includes all costs to AP of processing payments, including operational expenses and supplier charges. In addition to the costs associated with goods & services for which they are issued, invoices can generate additional expenses via delay or error. An estimated 90% of all invoices globally are still processed manually. While processing one manually costs between $12 and $30, automation has significantly cut down costs to $5 or less, per invoice. 

Accounts Payable KPI #2: DAYS PAYABLE OUTSTANDING (DPO) 

This metric indicates that the average duration it takes for your company to pay back your suppliers is used in cash cycle analysis. A high or low DPO compared to the industry average can affect your business. Although a high DPO can be advantageous for your company as the excess cash on hand can be used for short-term investments, payment delays can affect supplier relationships. On the other hand, a low DPO suggests that the company isn’t wholly utilising its credit period and could also indicate that it is operating inefficiently. 

Accounts Payable KPI #3: INVOICE PROCESSING CYCLE 

Evaluating this metric can help you understand where your AP staff is spending the most time. Besides identifying time-consuming tasks, monitoring this KPI also helps avoid late payment penalties. Businesses that process invoices manually take up to two weeks or more to process, and with automation, you can drop that to hardly a day or two. The longer an invoice is out, the greater is the risk it poses to your business. The processing costs will rise, but you will miss early payment discounts. 

Accounts Payable KPI #4: PAYMENT ERRORS AND PENALTIES 

Although it is widespread, payment errors are major financial drains facing organisations today, can affect credit terms and take a toll on vendor relationships. The most common payment errors include data entry errors, payments made to the wrong vendor, and processing an invoice multiple times. The higher the rate of late payments, the more money your business will lose via statutory interests and fees. Also, tracking errors like duplicate payments can help identify fraud. Identifying which AP team member has committed which error allows for identifying additional training needs and process breakdowns. 

Accounts Payable KPI #5: DISCOUNTS OFFERED Vs CAPTURED 

Businesses constantly aim to get as many discounts as possible to save costs and improve their company’s bottom line. This metric refers to the number of early payment discounts your business secured in relation to how many were offered to you. Not only does it help track missed opportunities and the amount of money you could have saved during an early payment, but it also indicates whether your company is meeting supplier obligations. Finance leaders make it a goal also to track the reasons the discounts weren’t captured – such as payment delays, vendor terms not set up correctly in the system, or invoice holds that prolong payment processing. 

Accounts Payable KPI #6: STRAIGHT THROUGH INVOICE PROCESSING RATES 

Straight through or touchless invoice processing eliminates paper invoices and the hassles of manually matching POs with invoices. The higher your touchless invoice processing rate, the lower your overall costs. Having a strong straight-through processing rate influences most of the above-mentioned AP KPIs. Removing manual steps can help cut costs and shorten the lead time to process an invoice. The best-in-class AP departments hit about 71% touchless invoice processing rate. 

Accounts Payable KPI #7: ROI ON INVOICE AUTOMATION 

Even though automation is the best practice for increasing AP efficiency, it is still important to evaluate your ROI. Estimating how much invoice automation will benefit your business can be complex. It requires considering factors including the average salary of AP staff and the amount of time and resources your business spends processing each invoice. When this AP metric isn’t tracked, you might not know what’s helping and what needs to be changed. 

Is Automating AP An Advantage for Accounts Payable KPIs? 

Automating your accounts payables operations can help you unlock the ability to track your accounts payable KPIs more closely. AP automation and actively reviewing the metrics mentioned above can help limit errors and decrease supplier inquiries. Moreover, automation allows for the centralised data collection of your payment data. Advanced and predictive analytics can give you a complete picture of your AP operations. A successful accounts payable process is just around the corner with proper metrics. 

See how QX transformed AP operations for one of the world’s top beverage producers, freeing their finance team to focus on strategic growth. Read the full case study! 

Book a Consultation 

Interested in exploring everything AP automation can do for your business? Schedule a consultation call with one of our experts today to find out how you can streamline and digitise your accounts payable process.