Transformation in Accounts Payable (AP) is not just about automation or digitizing processes – it’s about understanding performance. How well is your AP function doing today? And more importantly, how do you know? The answers to these questions lie in two critical concepts: Key Performance Indicators (KPIs) and Benchmarking. Both play pivotal roles in ensuring that AP operations are not just running, but running efficiently, accurately, and competitively.
This edition in our AP Transformation series breaks down the significance of KPIs and benchmarking, explaining how they differ, where they intersect, and why mastering both is essential to driving real, measurable progress.
The Power of KPIs in Monitoring Performance
KPIs, or Key Performance Indicators, are quantifiable metrics used to evaluate the success of a specific function, activity, or team against predefined goals. In the context of AP, they help managers and stakeholders keep a pulse on daily operations and long-term goals. They serve as the internal dashboard for measuring consistency, speed, and control.
Some commonly used KPIs in AP include:
Turn Around Time (TAT) – measuring how quickly invoices are processed from receipt to posting or payment.
Accuracy – ensuring invoices are processed without errors, minimizing rework. Duplicate Payments – identifying and reducing instances where vendors are paid more than once for the same invoice.
Early Payment Discounts – tracking how often the business captures discounts offered for paying invoices early.
Days Payable Outstanding (DPO) – monitoring how long the organization takes to pay its invoices, helping balance cash flow with vendor relationships.
These metrics create visibility, flag inefficiencies, and help guide corrective action where needed. But knowing how well your team is doing is only half the equation. To truly understand your position, you need to compare.
Benchmarking: Seeing the Bigger Picture
While KPIs reflect how a process is performing internally, benchmarking adds context. It involves comparing your current performance with that of your industry peers or global best practices. This practice helps organizations understand whether their AP function is merely surviving or thriving in a competitive landscape.
Typical AP benchmarks include:
Paid on Time – the percentage of invoices paid on or before the due date. Purchase Order Coverage – the proportion of invoices supported by approved purchase orders. Invoice Processing Cycle Time – the average time taken to process an invoice from receipt to payment.
Straight Through Pass – the percentage of invoices processed without manual intervention. Cost Per Invoice – the total cost involved in processing one invoice, from labour to technology overhead.
Supplier Queries – the volume and frequency of vendor inquiries about payments, often a sign of inefficiencies or communication gaps.
Benchmarking is an opportunity to not just identify gaps, but to also learn from others. It enables AP leaders to set realistic, yet ambitious goals based on industry norms and to position the AP function as a value driver rather than a back-office cost centre.
KPI vs. Benchmarking: Complementary, Not Competing
While KPIs and benchmarking serve different purposes, they are most powerful when used together. KPIs provide immediate feedback on what’s happening inside your processes. Benchmarking reveals how those results stack up externally. Together, they allow for a full spectrum view of performance – operational and strategic.
When implemented thoughtfully, KPI tracking and regular benchmarking help organizations stay agile, continuously improve, and maintain accountability. They also support proactive decision-making by highlighting trends before they become problems.
Making Measurement Meaningful
Ultimately, metrics should be more than just numbers in a report – they should tell a story. Are your AP processes helping build trust with suppliers? Are they enabling healthy cash flow? Are they scalable and resilient under pressure? Measurement should empower teams, not intimidate them. That means choosing the right KPIs, setting clear targets, and embracing benchmarking not as criticism, but as a catalyst for improvement.
At Right Path, we believe that AP transformation starts at the source – with high-quality data and disciplined processes. Stay tuned as we explore Vendor Master Maintenance in the next instalment, where we’ll discuss how organizations can sustain this data quality over time.
Explore our website to learn more and claim your free Procure-to-Pay (P2P) assessment. Let’s build smarter foundations for your finance function – starting with the master data that powers it all.
