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Metrics to Help Evaluate Discount Capture Performance

DiscountWe have all heard a number of sayings like “what gets measured gets done” and “a dollar saved is a dollar earned.” When it comes to  measuring the early payment discount capture performance of an organization, these sayings are very valid. We have already published an article on the different KPIs that you can use to help improve the performance of your accounts payable operations. In this blog post, we take a look at the specific metrics around the entire discount management process.

Discount management does not work in a vacuum. Trying to increase discounts captured while still dealing with issues on the front-end (e.g., paper invoice receipts) and back-end (e.g., check payments) of the accounts payable process will typically only yield minimal results at best. In order to capture incremental discounts, it is important to take a holistic look at the entire process, identify areas where there are roadblocks and try to fix them.

Here are some metrics that organizations can track to better understand their discount capture performance.

 

Metrics to Track

Best-in-Class

Laggards

Percentage (%) of spend available for discounting

Percentage (%) of suppliers that offer discounts

Discounts ($) taken as a percentage of total spend

Discounts ($) taken as a percentage of total discounts ($) offered

Percentage (%) of invoices with exceptions

Average time from invoice receipt to approval

Percentage (%) of invoices paid within terms

Percentage (%) of invoices received electronically

Percentage (%) of payments made electronically

 

The results you can expect against each metric depend on a variety of factors – the industry, size of the organization, and the extent of automation processes, etc. Another important aspect to be aware of is that benchmarking against another organization is not always effective because each organization may measure and report metrics differently.

What is probably more valuable is benchmarking against your own organization. Best-in-class companies evaluate these metrics periodically and look for ways to improve their operational performance against these key performance indicators (KPIs). As these metrics improve through automation or process optimization, you will likely see an improvement in the savings from discount capture.

Click here to learn more about payables automation options from ADP®

 

Learn More About Electronic Invoicing Solutions from ADP



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