As we enter summer with the hope that we can soon put this COVID era behind us, we examine how accounts payable departments can best set goals and measure performance in these trying financial times. By following our recommendations for a formal goal-setting and performance review process your department will shape up to be at its best in 2022 and beyond.
Explore further with our "Setting AP goals and measuring performance" Infographic.
What are the most important things for an Accounts Payable (AP) department to achieve?
The accounts payable department’s three biggest areas of responsibility are:
- Keeping track of what a company owes to suppliers
- Ensuring payments to those suppliers are approved
- Processing those payments
Documenting and disseminating accurate information within the accounts payable function is a requirement to producing an accurate balance sheet, which is why accuracy, efficiency and adaptability are all essential to the success of your AP organization.
The AP function is central to how every business operates. If an AP department is running with a high level of functionality, it will:
- Develop and maintain good relationships with suppliers by keeping accurate and up-to-date supplier information in the company’s systems
- Pay suppliers on time and develop collaborative and positive relationships with suppliers to gain favorable payment terms and discounts
- Keep accurate books, ensuring that cash forecasts are accurate and that working capital can be optimized
- Help prevent mistakes and fraud
How do we set the right goals to achieve AP departmental success?
One way to shape your AP department to operational excellence is through goal-setting and the performance review process. In a recent study, Inc Magazine found that 21 percent of organizations who used goal-setting tools and processes were more productive than their counterparts. Sixty-nine percent of high-achieving companies surveyed said that creating and working towards business goals is the most effective way for any company to build a high-performance team.
Start with your organization’s goals to build your AP department goals
To set goals for your department, first look at what overarching company goals have been put in place. You will want to set up your departmental goals in alignment with and cascading down from overall organizational goals. If every department in your organization has those top level goals in mind and maps back to them, there is increased likelihood overall company goals will be achieved.
Host a brainstorming session with your AP team to develop team goals
Consider hosting a goals brainstorming session with your AP team. There are great tools like Miro and Figma for shaping your brainstorming, which will give you a fun and engaging interface and allow everyone to participate including team members working remotely. Gather with your team and engage in a free flow of ideas, pare your ideas down to a reasonable number, and create a shared document to use as a reference point throughout the year.
Consider using the SMART goals framework when setting your AP department goals
After you’ve completed your brainstorming session, look at your list of goals and see if they fall under the SMART guidelines. Consider eliminating goals that do not comply.
The SMART goals (Specific, Measurable, Achievable, Realistic, Timely) framework is most often attributed to Peter Drucker's Management by Objectives concept, and the term was first used in a public forum in the November 1981 issue of Management Review by George T. Doran. While SMART has been around for over three decades, it maintains relevance in goal-setting today.
When using a SMART framework, work with your AP team to make sure your goals are clear and reachable. Each goal should be:
- Specific (simple, sensible, significant)
- Measurable (meaningful, motivating)
- Achievable (agreed, attainable)
- Relevant (reasonable, realistic and resourced, results-based)
- Time bound (time-based, time limited, time/cost limited, timely, time-sensitive)
Make the goals meaningful to each AP team member responsible for achieving them
It’s important when you set goals for your team that they are meaningful to those who will be responsible for executing on them. In fact, according to the Inc study, if the goals you set are irrelevant to individual team members, 93 percent of your employees will not be able to translate them into actions. This is where the brainstorming and team activity of goal setting will be of use. If your team is involved in shaping AP department goals, you will all have greater success accomplishing the things you’ve set out to do.
Keep your AP team’s goals top of mind
One fatal error commonly made in organizations is when teams set performance goals and then forget about them until the performance review time comes around. This is an ineffective use of goal creation. Your team’s goals should be front and center in everything you do as a department.
One way to keep your goals living and breathing within your organization is to break them down into small, attainable steps that you can tackle all year long. If you have KPIs you’re trying to reach, break them into smaller chunks. Instead of focusing on year over year (YoY) goals, set weekly KPI goals that will help you stay focused and allow you to take baby steps toward each larger accomplishment.
Post your goals in a visible location. If you’re working remotely, post them on a communications portal, or read them at the beginning of each team meeting. Find a way that best works for your AP group to remain focused and not lose sight of team goals.
Make sure your goals are measurable. Go back to the SMART framework and look at it from a goal measurement perspective:
- Specific: Make certain it’s clear to everyone on the team what the goal is, this way your team won’t struggle to get there
- Measurable: Map out how your progress will be measured. It can be in dollar signs, in number of projects completed, whatever works best for your team
- Attainable: Make sure each goal you set is within reach. If you can’t possibly achieve a goal, it’s just a dream that will not likely become a reality
- Relevant: Ensure your goal maps to business objectives - this goes back to tying AP team goals back to your organization’s overarching goals
- Time-based: Set a reasonable timeline to achieve your goals
Don’t make the mistake of waiting until the end of the year to talk with team members about their goals, where they are with them and if they need help achieving any of them. If you have an ongoing dialogue with each individual employee about his/her goals throughout the year, he/she will be more likely to be successful at accomplishing them, will be happier team members, and will remain engaged and highly motivated members of your staff.
Real-time feedback is the most meaningful and impactful work you can do as a manager. Because it’s given in the moment when the action is underway it becomes the most clear guidance that person can receive, giving them lessons on how to improve on the action right then and there, and creating an indelible mark on how that team member will accomplish similar tasks going forward.
Once you’ve set AP goals how do you measure performance?
The best way to measure the performance of your AP staff is to formalize a performance appraisal process. Performance reviews are a necessary component of measuring your team’s AP work, both individually and collectively. While performance appraisals can cause unnecessary anxiety to surface for both managers and their employees, focusing on a few key, high level, attainable goals can help keep the process clear and less anxiety-provoking.
To set up a performance review process, consider using the following guide:
- Develop an evaluation form
- Identify performance measures coming from your AP department goals
- Set guidelines for two-way feedback
- Create clear follow-up procedures if an individual is having difficulty achieving goals
- Set an evaluation schedule
Your AP department’s focus on accuracy, efficiency and adaptability
When developing goals and measuring performance for your Accounts Payable team members, shape your strategy around these three aforementioned key elements:
Ground your thinking and actions in these three areas to achieve organizational excellence for your AP team.
Why is accuracy important for an AP team?
Making payments is the core of Accounts Payable, which means the most impactful goal of team members will be accuracy in their work. Examples where accuracy is essential include error-free data entry, accurate payments that align with contract terms, prompt and correct filing procedures, and clear and well-articulated communications.
A key component of accuracy is attention to detail. Throughout the year, promoting guidelines and practices that reinforce attention to detail will help keep your team focused on accuracy in their work.
How does efficiency help make for an excellent AP team?
Improving your Accounts Payable team’s efficiency can help you reach your department goals, and the goals of your organization. Saving time will eventually lead to saving money. One way to improve efficiency for an AP department is to find and implement tools that will help your team reduce those onerous manual tasks so often part and parcel of being in accounts payable. Which goals you create to improve efficiency will tie to how your current system is set up, but some evergreen goals might include adapting advancing technology within a specified time frame, such as optical character recognition technology for invoice entry or converting more check-based payments to epayments. Consider mapping out all the time-consuming tasks your AP department has and determining which ones might be automated or eliminated.
For AP department managers, taking the 40,000 foot view at the beginning of the goal-setting process will quickly show that there are attainable ways to support your team in their goal of increased efficiency. A shift away from manual processes and towards digital payments will build efficiencies and reap rewards for your organization. With digital payments technology, your company’s AP systems can be streamlined, allow for more efficiency, and introduce new cost-savings measures for your business.
How will adaptability amongst AP team members contribute to your organization’s overall success?
Change is a natural part of working for a business, and because of this, adaptability is key to any team member’s success. Because the work of an AP department is essential to the success of the business, fostering adaptability in your team members will be immensely useful to your organization. An adaptable team member remains calm under stressful situations sometimes brought about by change. When faced with change, an adaptable person is more likely to continue to accomplish tasks and meet deadlines in the same manner they always have, regardless of what change brings.
When assessing your AP team’s performance when it comes to adaptability, this can be measured by how readily your team members adjust to changes in department policies and procedures. Also consider how receptive or resistant they are to the introduction of new ideas for improving processes or creating efficiencies. This will help you assess how well your team members adapt to change.
What’s the best way to map out your performance review for your AP team?
Now that you’ve set your goals as a team, made them a part of your daily work, and mapped out a schedule for performance revues, you need to plan what those end-of-year performance reviews will actually entail. You will be well-situated if you have had an ongoing conversation with team members throughout the year about their goals and your expectations.
When planning your performance review process, you will want to start at the very beginning. Engaging in a start-of-the-year conversation with each of your team members to discover the things they want to achieve will be first on your list. This will happen at the very beginning of the performance cycle.
Setting department goals with your employees should start with an understanding of their individual goals. In this initial goal-setting meeting you should outline what the whole process will look like all the way through to the final performance review at the end of the year. If there are numerical systems in place for assessing performance, lay those out for your employee so they understand how your company guides the process from beginning to end.
Approximately two weeks before each performance review, ask your team members to document the things they are most proud of from the year. At the same time, ask for a few sentences from individuals across the company who work closely with each member of your team. Review your notes from the past year that document the things your employees have excelled at and the places where they could improve. On the day of your meeting, share your appraisal with your team member giving them enough time for review before you meet. This gives your employee an opportunity to digest the content of their assessment and prepare for the conversation ahead.
In the review conversation, most of your team members will likely be good, solid workers, “So for the vast majority, you should concentrate exclusively on things the person has done well,” says Dick Grote, author of “How to Be Good at Performance Appraisals.” He goes on to add that this method tends to motivate people who are already competent at their jobs. For those who are struggling, give specific advice, and keep the conversation fact-based instead of veering into the personal. This will allow your employee, being given constructive feedback, to find an opportunity to improve as opposed to feeling personally attacked.
If possible, keep the topics of compensation and rank to a separate meeting. It will be distracting for you both if those topics are on your minds and treating them separately will allow for a more meaningful discussion on goals and future plans.
End your performance review session by reviewing the goals your employee set out to achieve and walking through all that they and your team have accomplished over the past year.
How can digital payments technology help your AP department succeed in achieving annual goals?
We’ve just described how you can create an effective goal-setting and performance review process for your AP team. We outlined that the three overarching goals for any AP department are accuracy, efficiency, and adaptability. Adopting an epayments system for your business will help you maximize the opportunity to achieve those goals by creating more efficient, less error-prone methods of operating and ultimately will save your company money. Learn more about how WEX payment solutions can be tailored to your business, so you can accelerate and streamline operations while creating lasting growth and success for your organization.
Institute of Finance and Management
Society for Industrial and Organizational Psychology
Accounts Payable and Procure-to-pay
Harvard Business Review
“How to be good at Performance Appraisals” by Dick Grote
Editorial note: This article was originally published on September 18, 2015, and has been updated for this publication.