Accounts Payable News^®

Performance Metrics – Not Just a Gimmick

When the ever increasing piles of paperwork mount up in your supposedly “paper-free” Accounts Payable department and someone mentions the use of performance metrics, the temptation is to dismiss its usage as a luxury you just don’t have the time for. However, with the inception of automated metric software, their implementation can actually save time if used properly and can raise the game of the Accounts Payable function. 

For example, if your FD or Head of Shared Services only ever speaks to you when there is a problem with late payments, duplicate invoicing or discrepancies in balance sheets, then your department is only ever going to be regarded as a necessary evil in his mind.  However, if you can provide useful and credible information on performance metrics which save time and add value to your organisation’s bottom line, then he may have to rethink his positioning of you.

Points to Consider

There are a couple of key points to consider and those are credibility and choosing which metrics to monitor.  There is no point measuring 50 sets of performance criteria which then have to be measured across multiple disciplines, generating inaccuracies along the way and take so long to collate that they lose all value as management tools.  It’s this poor application of performance metrics which creates the hostility towards implementing them at all, as their power as productivity enhancers becomes lost.

So Keep it Simple

It may sound obvious, but the key points to remember are who the metrics are for and what you’re hoping to gain from them.  Metrics need to tell a story.  To be useful, they also need to be easy to understand.  The organisations which use performance metrics most successfully are those which narrow them down to a few key areas such as:

• Invoice Productivity – year on year targets, cost per invoice, processing by location, timely capture of industry discounts
• Payment Efficiency – Cash flow by days paid, payments by method used etc
• Vendor Management – Vendors added by month, vendors changed per month etc
• Controls – sharpen AP tools with duplicate invoicing metrics, Vendor refund cheques

With automated data collection, key performance metrics can be delivered monthly or as needed in real-time, with the opportunity to incorporate real-time benchmarking too.  This information can be used not only as an internal performance measuring tool, but also to compare your operation to others in your industry.

So whether you're tracking three or 15 different sets of performance metrics, or whether you’re a multi national or small business, the accurate analysis of these can generate income, speed up the efficiency of Accounts Payable departments and fundamentally – add real monetary value to your organisation.