8 Accounts Payable Metrics CFOs Should Monitor

8 Accounts Payable Metrics CFOs Should Monitor

The responsibilities of a Chief Financial Officer (CFO) covers financial planning, risk management, and monitoring of cash flows. He or she looks into different metrics and ensures that every process in the finance department is efficiently done. A modern financial department setting relies both on human resources and automated procedures, which are done with the help of different tools like an accounts payable/AP workflow software.

Speaking of accounts payable, CFOs also closely monitor this one as it involves money that the company owes from creditors or suppliers. Mismanaged payables can lead to late payments, or losing even a long-time business partner. To avoid such circumstances, here are eight accounts payable metrics that every CFO should keep an eye on.

Volume of invoices received

If a CFO wants to have an idea how much work does the AP team normally handle, the total amount of invoices received by the department should be tracked. This statistic will also serve as the touchstone for other important metrics.

Volume of invoices processed

One of the main reasons why finance departments use AP workflow software is to help them process as many invoices as possible. By measuring the total invoices processed against the total invoices received, a CFO is guaranteed that the workflow being implemented is efficient and effective.

Time spent in processing invoices

It’s also important to measure how long it takes for a specific invoice to be processed from the time it was received. If the processing time is accelerated, it can make the company avoid incurring late fees. It can even earn the firm early payment incentives!

Cost spent on processing invoices

It is but natural for a good CFO to implement a cost-effective workflow in managing accounts payable. For him or her to know if the invoice processing isn’t taking up too much of the department’s budget, expenses like ap employees’ salaries and ap workflow software fees should be carefully accounted for.

Rate of erroneous payments

In reality, there’s no company that never makes an erroneous payment. The key to managing the consequences it gives is by actually keeping an eye on how frequent this inaccuracy is made. If not properly monitored, overpayment and duplicate payment can severely hurt a firm’s financial standing.

Rate of late payments

Late payments can also take on toll on a company’s overall financial functioning. Penalties will be incurred, and the reputation will be significantly affected. The firm might also end up losing even long-term suppliers and creditors.

Rate of discounts captured

Early payments — on the other hand — can earn a company some discounts. However, not all of the incentives offered by creditors and suppliers are captured. If the rate of captured discounts as measured against discounts offered is low, a CFO should think of ways on how to increase the number in order to save costs.

Percentage of electronic invoices received

Paperless invoicing offers a lot of benefits — from cutting manually-done procedures (e.g. Printing, sorting out, mailing) to ensuring more accuracy. The higher this particular percentage is, the more time (and more money) you will save.
When everything seems to be in disarray as your business grows, an AP workflow software might do the job. Contact Nexus Systems and let’s discuss how one of our business solutions can help you.

Category Business