Eight key performance indicators that you hadn't thought of in purchase to pay!
Blog26.06.2012 Comments (0)
Purchase to pay
We all know that key performance indicators are what we should be relying on to drive our business in the right direction. Continually evaluating the performance of a particular project in quantitative or actionable terms can help the stakeholders understand how they are progressing.
But what KPIs should we be relying on for accurate information? This depends on what is important to your organisation. Common examples of KPIs in accounts payable departments are cost per invoice, first time match rate, and exception rate. While important, simply relying on these KPIs may leave gaping holes in your understanding of your business risks etc.
What other questions do you need to be asking?
Attendees at sharedserviceslink.com’s Toning Up Purchase to Pay to Attain Touchless Processing conference last week came up with the following alternative KPIs:
Number of retrospectively raised purchase orders. Having a figure specific to the number of retrospectively raised POs is a clear indicator of non-compliance.
Percentage invoices touchlessly processed. Taking first time match rate a step further, this information will reflect the amount of time your accounts payable department has free from manually handling invoices, allowing them to move into a more value-add role.
Average cycle time to workflow. Knowing how long it takes on average to process one invoice, from receipt to payment tells you one story, but building an indicator around actual workflow time can help you drive improvements specifically in this area.
Internal customer satisfaction. While this may not be such an easily quantifiable KPI, it does give some indication as to how well the outside world views your service and why.
Number of duplicate payments. This KPI provides information on your ability to control your process and manage your risk. A high number of duplicates could indicate weak spots in your system and process. It is telling of a number of flaws, including poor visibility, poor invoice tracking management, and poor vendor database management.
Number of queries received by accounts payable. What story does this KPI tell you? The number of queries can be indicative of the quality of your process, but the reason for their calls is even more useful. This can mirror exactly where the flaws are in your procure to pay process.
Percentage of vendors on preferred suppliers list. Suppliers are often preferred because their contract conditions are more suitable to the requirements of the buyer’s business. The more vendors you have on the list, the more easily procurement will be able to procure efficiently, and the more they will back the purchase to pay process so all their negotiating efforts are adhered to.
Percentage negotiated discounts captured as a value. Failing to take advantage of hard negotiated discounts represents unnecessary expenditure. Knowing the percentage of discounts captured can reflect the strength of the alignment between finance and procurement.
Watch this space for a fuller list of KPIs that you hadn’t thought of!