Shared Services Link – KPIs for successful Accounts Payables

It’s not exactly hot off the press (my fault) but I’ve just caught up with an interesting piece from Shared Services Link, who run events in the shared services field. Their website has some good content as well – it’s not all procurement or P2P related by any means but is worth checking out.

This particular article is titled “Eight key performance indicators that you hadn't thought of in purchase to pay!” And it does what it says on the tin, focusing on the accounts payables area in particular.

The usual indicators used to measure AP performance, it explains, are cost per invoice, first time match rate and exception rate. But a range of alternative KPIs came from attendees at sharedserviceslink.com’s recent “Toning Up Purchase to Pay to Attain Touchless Processing conference” (no sarcastic comments please about the excitement inherent in that title...)

Here are a sample of the eight to whet your appetite – these are three of the KPIs suggested:

  • Number of retrospectively raised purchase orders. Having a figure specific to the number of retrospectively raised POs is a clear indicator of non-compliance.
  • 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 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.

Just as we wrote recently that non-compliance is a good way for procurement to pick up opportunities for improvement, the same applies to many of the metrics that can come from accounts payable. Retrospectively raised Purchase Orders  for instance are a sure sign of weakness in the core procurement process itself, or in spending and financial governance. They also leave the door open for fraud and corruption of course.

We've published a couple of pieces recently suggesting that procurement leaders should perhaps take more of an interest in accounts payable and related activities - so this is another useful bit of content to maybe make us think more about that particular area.

Voices (2)

  1. flog:

    I recall looking at number of retrospectively raised purchase orders, by volume it ‘offenders’ were the departments and predominately emergency repairs etc – all low value and in total accounting for about 10% by value.

    Who accounted for the 90% by value? The Finance Department – mainly getting ‘a bit of advice’ from A or B. It made for an interesting discussion at SMT, given that it was the Finance Director was of the opinion that there was a ‘problem’ out in the departments!

  2. life:

    Number of retrospectively raised purchase orders seems like a good one, but number of queries received? Manager’s won’t be very popular trying to capture that one.

    The third one is interesting. I’m not sure it actually captures the value add of a procurement team, as negotiation tactics on the supplier side, and what counts as a discount, may skew meaning. It seems commonly held to be one of the KPIs that has less integrity than others, being more open to manipulation, but ultimately (but perhaps not literally!) little else matters?

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