Effective Accounts Payable (AP) management is vital for maintaining liquidity, fostering vendor relationships, and ensuring financial stability. With the right accounts payable KPIs tracked through your cloud dashboard, your team can gain actionable insights to streamline operations, reduce costs, and improve efficiency. In this blog, we’ll explore the key AP performance indicators that every cloud dashboard should track to optimise your AP function.
top ten accounts payable KPIs
Your cloud dashboard should track the following critical accounts payable KPIs to streamline your AP operations and improve financial management:
Days Payable Outstanding (DPO)
What it measures: DPO tracks the average number of days your organisation takes to pay its suppliers after receiving invoices.
Why it matters: A higher DPO allows the business to retain cash for longer, which improves liquidity. However, excessively high DPO can damage supplier relationships and result in missed early payment discounts.
Formula: DPO = (Ending Accounts Payable/Cost of Goods Sold) × Number of Days
cost per invoice
What it measures: This metric calculates the total cost of processing each invoice, including time spent on manual tasks and overheads like technology costs.
Why it matters: Keeping this cost low is crucial for improving operational efficiency. A high cost per invoice usually suggests a need for automation.
Formula: Cost per Invoice = Total AP Processing Costs/Total Number of Invoices Processed
invoice exception rate
What it measures: The percentage of invoices that contain discrepancies such as incorrect amounts, missing details, or wrong vendor information
Why it matters: A high exception rate indicates that your processes need more scrutiny or automation. Keeping the exception rate low ensures smoother, faster processing and fewer delays.
Formula:
Invoice Exception Rate = (Number of Invoices with Discrepancies/Total Number of Invoices Processed) × 100percentage of payments made on time
What it measures: This KPI tracks how often your company makes payments by the due date. Timely payments improve vendor relations and avoid late fees.
Why it matters: On-time payments are crucial for maintaining strong vendor relationships and ensuring operational continuity.
Formula: Percentage of Payments Made on Time = (Number of Payments Made on Time/Total Number of Payments Due) × 100
supplier invoice ageing
What it measures: Tracks the average number of days an invoice remains unpaid past its due date.
Why it matters: High invoice ageing can indicate delayed payments or bottlenecks in your AP process. Keeping invoice ageing low ensures smoother cash flow and prevents unnecessary interest charges.
Formula: Supplier Invoice Ageing =
Total Outstanding Invoices/Average Daily Purchases
(Where Average Daily Purchases = Total Purchases/Number of Days in the Period)
early payment discounts captured
What it measures: Tracks how much your organisation is saving by paying invoices early.
Why it matters: Capturing early payment discounts can lead to significant cost savings. Companies that effectively leverage early payment discounts can reduce their overall AP costs.
Formula: Early Payment Discounts Captured = (Amount of Early Payment Discounts Taken/Total Amount Eligible for Discount) × 100
automated invoice processing rate
What it measures: The percentage of invoices processed automatically as opposed to manually.
Why it matters: Automation reduces errors and processing time, improving overall AP efficiency. A higher rate of automation also reduces administrative costs.
Formula: Automated Invoice Processing Rate = (Number of Invoices Processed Automatically/Total Number of Invoices Processed) × 100
total invoice cycle time
What it measures: This metric measures the end-to-end invoice lifecycle from purchase initiation to final payment.
Why It matters: A longer cycle indicates that there are bottlenecks in the process that can lead to payment delays. Shortening the cycle ensures faster processing and timely payments.
Formula: Total Invoice Cycle Time = (Date of Payment - Invoice Date)/Number of Invoices
payment error rate
What it measures: The number of payment errors made during the AP process, such as duplicate payments or incorrect amounts.
Why it matters: Minimising errors ensures more accurate payments, reducing the need for reconciliation and improving vendor trust.
Formula: Payment Error Rate = (Number of Payment Errors/Total Number of Payments Made) × 100
Start Tracking the Right Accounts Payable KPIs Today with a Smarter Cloud Dashboard.
vendor dispute rate
What it measures: The percentage of payments that suppliers dispute.
Why it matters: High dispute rates indicate problems with the AP process, such as inaccuracies or missed payment terms. Reducing dispute rates can improve vendor relations and ensure smoother transactions.
Formula: Vendor Dispute Rate = (Number of Disputed Payments/Total Number of Payments Made) × 100
By tracking these critical accounts payable KPIs through your cloud dashboard, you can gain real-time insights, identify inefficiencies, and make data-driven decisions that optimise cash flow, reduce costs, and strengthen supplier relationships. Incorporating AP automation KPIs enhances operational efficiency and accuracy.
how can Infosys BPM help boost accounts payable efficiency?
For organisations looking to optimise their accounts payable processes, Infosys BPM offers advanced cloud-based automation solutions that streamline AP functions, reduce costs, and improve vendor relations for long-term success. The Accounts Payable on Cloud (APOC) solution supercharges accounts payable efficiency by leveraging its agentic AI‑driven SaaS platform. It automates invoice capture and performs auto GL coding. It enables two‑ and three‑way matching and handles duplicate detection and configurable workflow approval in a unified cloud environment.
