Total Number of Invoices Received
By tracking the number of invoices you receive during a specific period, you can be better prepared to handle busy times.
For example, if you receive the majority of invoices the last week of the month, you can plan by increasing staff for the week.
Average Cost per Invoice
Tracking the average cost per invoice can be an eye-opener. This is done by tracking labor costs, software infrastructure, and any other peripheral costs such as envelopes, paper checks, and postage.
Depending on your average cost, you may want to consider switching to AP automation, which reduces processing costs across the board and improves your ability to scale.
The formula for calculating average invoice cost is:
Average Cost Per Invoice = Total Invoice Costs / Number of Invoices processed
Invoice Processing Cycle Time
Invoice cycle time measures how long it takes to receive, process, and pay supplier invoices. This is measured in days.
If you are taking too long to process invoice you run the risk of getting charged late fees or missing out on early payment discounts. Slow invoice processing can also negatively impact vendor relationships.
AP automation software can greatly improve invoice processing time. Ardent Partners State of ePayables for 2023 shows that best-in-class AP teams are processing invoices more than 5 times faster, 3.4 days per invoice compared to 17.9 days.
A useful metric for assessing performance is tracking discounts captured, which more importantly, displays how many early payment discounts you weren’t able to capture because of slow invoice processing times.
A low result may convince you to seek out a more optimal system for processing accounts payable.
The formula for calculating discounts captured is:
Discounts Captured = Number of Discounts Captured / Number of Discounts Offered
Tracking invoice processing error rates can be disheartening. This metric tracks common errors such as overpayments, underpayments, and duplicate payments and provides you with a percentage of invoice payment errors.
To track your error rate, use the following formula:
Error Rate = Number of Incorrect Payments / Number of Invoices Paid