“AP Automation? Check! Now, how do we prove it’s working?” That’s the million-dollar question on everyone’s mind after investing in Accounts Payable (AP) automation. You’ve banished those pesky paper invoices and manual processes – but is it really saving you time and money? Fear not, those benefits are absolutely real, and the way to quantify them is through some well-chosen KPIs (Key Performance Indicators).
Automation isn’t magic; it’s measurable. Track your KPIs, and the savings will speak for themselves.
Think of KPIs as your automation success dashboard. Let’s dive in and get those metrics flashing green!
Cycle Time Metrics
AP is all about time – how quickly invoices get processed, how long it takes to make payments. These metrics are a speed test for your new automated system:
- Days Payable Outstanding (DPO): The average number of days it takes your company to pay those invoices. A lower DPO after automation is a win – it means you're paying on time (or even early!) and potentially capturing discounts.
- Invoice to Approval Cycle Time: How long your invoices sit around before someone says "yes, pay this." Automation should slash this time dramatically.
- Invoice Processing Time: From receipt to coded and ready for approval – this should be lightning fast now.
- Time from Invoice Approval to Payment: After getting the thumbs up, how long to actually cut the check? Automating payment methods speeds this up too.
Productivity Metrics
The point of automation is to make your AP team super-efficient. Time to see the proof:
- Invoices Processed per AP FTE: How many invoices each full-time employee handles in a period of time. With automation, this should skyrocket! Evaluate the results through a growth ratio and benchmark them against your pre-automation process. The number of invoices processed per Accounts Payable Full-Time Equivalent (AP FTE) can increase from 25% to 250% per month.
- Touchless Invoice Rates: The percentage of invoices that sail through the system without any manual intervention. The higher your percentage, the more time your AP team has for valuable analysis work, rather than data entry.
- Invoice Processing Costs Per Invoice: This is the big one! Studies show that the average cost of manually processing a single invoice is between $12 and $30! Automation can reduce that cost by 80% or more! Lowering costs per invoice from $4+ to under $1
Accuracy Metrics
Mistakes cost money and time. Automation isn’t just speedy; it’s also about precision:
- Invoice Matching Rates: Does the automated system accurately match invoices to purchase orders and receipts? Catch the percentage of auto-matched to POs/GRNs. Aim for as close to 100% as possible.
- Early Payment Discounts Capture Rate: If you have vendors offering those "pay within 10 days" discounts, are you actually making those deadlines more often?
- Percentage of Invoices Requiring Manual Exception Handling: Even the best system sometimes needs a human touch. A lower percentage shows your automation is robust!
Analytics for Continual Optimization
Metrics aren’t just about patting yourself on the back – they’re a tool for getting even better! Your payable automation software solutions should provide powerful analytics to uncover:
- Processing Bottlenecks: Where are invoices getting stuck? Is a particular approver slow, or does the system struggle with a certain vendor's format?
- Policy Compliance: Are approvals following the rules? Analytics can flag invoices that seem to bypass important steps.
- Spotting Duplicate Invoices: Automation can prevent them, which saves everyone headaches (and prevents duplicate payments!). Are 2%+ slipping through?
- Managing Vendor Relationships: Who's always on time, and who habitually submits late invoices that throw a wrench in the works? Analytics can give you the data to have those data-driven conversations.
Summary
AP automation is a transformative investment, and with the right metrics you can prove it! These KPIs provide valuable insights into:
- Cost savings: Reduced invoice processing costs, early payment discounts, and a leaner AP department.
- Efficiency gains: Faster invoice cycle times mean less time spent chasing paper and more focus on strategic initiatives.
- Error reduction: Minimizing duplicate payments, late payments, and compliance issues saves you money.
The key is to establish a baseline before automation, track the metrics diligently post-implementation, and use the data to make even smarter decisions.
To dive deeper into how AP automation can specifically help your business navigate the complexities of sales tax compliance, reducing the risk of audits and penalties, check out our detailed guide “Sales Tax Compliance with AP Automation: Reducing Risk and Ensuring Accuracy.”
Ready to unleash the full potential of your AP automation journey? Contact Mosaic today! Our experts will guide you to select the right metrics, interpret the data, and continuously optimize your processes for maximum ROI. Let’s turn those metrics into a real success story!
