Developing Analytics for Your AP Team

Developing Analytics for Your AP Team

Metrics are typically implemented not only to measure a process but to establish goals and to implement action plans for process improvements. Metrics should be established and agreed upon by the business process owners. They should also be well-organized, as automated as possible, and meaningful to the process.

As a best practice, data should be obtained from ERP systems directly—not manually. This approach accommodates accuracy, timely reporting, and ongoing analytics.

Simply put, metrics help determine trends, forecasts, spikes, and benchmarking goals.

Challenges with Accounts Payable metrics and analytics programs

The challenges with many AP metrics and analytics programs have common themes across several companies and industries:

  1. Several data sources compounded by disparate data silos
  2. Few and limited analytics (too small a data set to draw intelligence from)
  3. Far too much analytics (excessive data that results in an over-analysis or an inability to make a decision)
  4. Poorly calibrated metrics

Defining accounts payable analytics

Metrics are best organized in a scorecard format so management can focus on results and determine what to analyze.

Which brings us to the topic of developing analytics for the accounts payable process. Here is a scorecard that can be used to clearly define objectives to which to base analytics in AP:

Objectives by process

Section 1 – Supplier Master Set-Up
  • Number of Active Suppliers on the Supplier Master
  • Number of Duplicate Suppliers
  • One Time Supplier Usage
  • Percentage of Suppliers Screened Against OFAC
  • Percentage of W9s with TIN Match Exceptions
Section 2 – Invoice Processing
  • Non-Purchase Order Invoices
  • Days Payable Outstanding (DPO)
  • Percentage of Invoices Paid Within Terms
  • Percentage of Invoices Paid Early
  • Number of Manual Invoices
  • Number of E-Invoices
Section 3 – Customer Service
  • Time to Resolve a Supplier Issue
  • Number of Supplier Calls
  • Number of Emergency Payments
  • Aging of Outstanding Debit Balances
Section 4 - Disbursements
  • Number of E-Payments
  • Percentage of Duplicate Payments
Section 5 – Internal Controls and Compliance
  • Percentage of Duplicate Payments Prevented Monthly/Quarterly
  • Number of Self-Assessments Performed Quarterly
Section 6 – Research and Remediation
  • Time to Resolve a Supplier Issue
  • Outstanding Clearing Account Balances
  • Aging of Clearing Account Variance
  • Aging of Outstanding Debit Balances
  • Total Cost of the total AP Function as a Percentage of Revenue
  • Total Cost of the Accounts Payable Function as a Percentage of Revenue
  • Number of FTEs in the total AP Function
  • Number of FTEs in the Accounts Payable Function
Section 7 - Accounting, Reconciliation, and Month End Processes
  • Cycle Time for Completing Monthly Accruals
  • Aging of Clearing Account Variance
  • Aging of Outstanding Debit Balances

Objectives by impact

Section 1 - Payment
  • Total Cost of the total AP Function as a Percentage of Revenue
  • Total Cost of the Accounts Payable Function as a Percentage of Revenue
  • Number of FTEs in the total AP Function
  • Number of FTEs in the Accounts Payable Function
  • Non-Purchase Order Invoices
Section 2 – Transactional Quality
  • Days Payable Outstanding (DPO)
  • Percentage of Invoices Paid Within Terms
  • Percentage of Invoices Paid Early
  • Outstanding Clearing Account Balances
  • Aging of Clearing Account Variance
Section 3 – Customer Service
  • Time to Resolve a Supplier Issue
  • Number of Supplier Calls
  • Number of Emergency Payments
  • Aging of Outstanding Debit Balances
Section 4 - Controls and Compliance
  • Cycle Time for Completing Monthly Accruals
  • Number of Manual Invoices
  • Number of E-Invoices
  • Number of E-Payments
  • Number of Self-Assessments Performed Quarterly
  • Number of Active Suppliers on the Supplier Master
  • One Time Supplier Usage
  • Number of Duplicate Suppliers
  • Number of Duplicate Payments
  • Percentage of Suppliers Screened Against OFAC
  • Percentage of W9s with TIN Match Exceptions
  • Percentage of Duplicate Payments Prevented Monthly/Quarterly

Objectives by analytics category

Section 1 – DPO and Invoice Processing
  • Non-Purchase Order Invoices
  • Days Payable Outstanding (DPO)
  • Percentage of Invoices Paid Within Terms
  • Percentage of Invoices Paid Early
  • Number of Manual Invoices
  • Number of E-Invoices
Section 2 – Payment and Risk Management
  • Number of Self-Assessments Performed Quarterly
  • Number of Emergency Payments
  • Aging of Outstanding Debit Balances
  • Percentage of Duplicate Payments Prevented Monthly/Quarterly
Section 3 – Operational Analytics
  • Time to Resolve a Supplier Issue
  • Number of Supplier Calls
  • Cycle Time for Completing Monthly Accruals
  • Aging of Clearing Account Variance
  • Aging of Outstanding Debit Balances
  • Time to Resolve a Supplier Issue
  • Outstanding Clearing Account Balances
  • Aging of Clearing Account Variance
  • Aging of Outstanding Debit Balances
  • Total Cost of the total AP Function as a Percentage of Revenue
  • Total Cost of the Accounts Payable Function as a Percentage of Revenue
  • Number of FTEs in the total AP Function
  • Number of FTEs in the Accounts Payable Function
Section 4 – Supplier Master
  • Number of Active Suppliers on the Supplier Master
  • Number of Duplicate Suppliers
  • One Time Supplier Usage
  • Percentage of Suppliers Screened Against OFAC
  • Percentage of W9s with TIN Match Exceptions
  • Percentage of Duplicate Payments

Analytics, then, is the cream to AP's data—the good stuff, insights, rises to the top. Defining the right accounts payable metrics can set the foundation for your accounts payable analytics initiative.

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