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Improve AP Performance BY MAKING KPIs COUNT 3 of 5

TimeTime Taken to Process an Invoice

Most companies do not know how long it takes to process an invoice from the time it is received to the time it is approved and ready to be paid. One reason it is difficult to calculate this metric with paper-based processes is because there are no date and time stamps on a paper invoice to indicate when it was received, when it was coded, and finally, when it was approved and paid. Further, this metric may vary significantly depending on whether an organization has a centralized invoice receipt process (all invoices received at the AP department) or a decentralized process (invoices are received directly by approvers in the field and then forwarded to AP).

One of the advantages of electronic invoicing is the ability to track and measure how long an invoice spends in a specific process. Most solutions also allow administrators to configure these metrics on a per user basis—allowing them to determine if certain users are more efficient than others or if specific users need training with regards to invoice processing. A portlet from the ADP OpenInvoice solution shows the average time an invoice spends in each step of the process—coding, dispute resolution, and approval—for the last three months and allows for comparison of these metrics against last year averages.

Number of Invoices Processed Per Full-Time Employee

This metric measures productivity of the AP department staff—on average how many invoices a full-time equivalent employee (FTE) processes in a given time period. This could be further broken down by the different functions performed within AP—invoice receipt, data entry, coding, validation, dispute resolution, etc. This metric would be useful to track across a period of time to determine whether the AP department is getting more efficient. It also is a metric that an organization can use to help determine the success of an electronic invoicing initiative.

A large oil and gas company was experiencing a significant increase in invoice volume as a result of mergers and acquisitions. Through the use of electronic invoicing, the company is now able to process more than twice the invoice volume with a 30% reduction in AP staff. With a manual, paper-driven process, each FTE was processing 7,895 invoices per year, whereas with the electronic invoicing and automated workflow, the company was able to increase the average number of invoices processed per FTE to 15,111.

 

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This article was orginally posted on Paytech.com in January 2015

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