Setting effective AP department goals: How to measure success

As we approach the end of the year and begin forming our goals for the upcoming year, we reflect on how accounts payable departments can set meaningful goals and measure performance in these challenging financial times. By following our recommendations for a formal goal-setting and performance review process, your AP department will be well-prepared to excel in 2025 and beyond.

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. This 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 fact, according to Forbes, “89% of HR leaders agree that ongoing peer feedback and check-ins are key for successful outcomes.” 

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. Many tools can enhance your brainstorming sessions. These tools offer fun, engaging interfaces and allow full team participation. Remote team members can also join in easily. Gather with your team and encourage a free flow of ideas. Pare down your ideas to a reasonable number then create a shared document 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. 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.

Break down goals into attainable steps

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.

Use the SMART framework for measurable success

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 wait until the end of the year to discuss team members’ goals. Regular check-ins help track progress and offer support. Ongoing dialogue throughout the year increases employees’ chances of success. They will be happier, more engaged, and highly motivated team members.

Real-time feedback is the most impactful work you can do as a manager. Given during the action, it provides clear guidance. It helps employees improve immediately and leaves a lasting impression for future tasks.

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:

• Accuracy
• Efficiency
• Adaptability

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, so accuracy is the team’s most important goal. Accuracy is essential in error-free data entry, contract-aligned payments, prompt filing, and clear communication.

Attention to detail is key to accuracy. Promoting guidelines that reinforce attention to detail will keep your team focused.

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.

Improve AP efficiency by finding tools that reduce tedious manual tasks. Efficiency goals depend on your current system setup. Potential goals include adopting automated AP solutions or switching from traditional payments to virtual payments. 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 a high-level 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 virtual 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.

Start with goal-setting conversations

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.

Preparing for and conducting the review

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 virtual 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 virtual payments 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.

For more insights and updates on corporate payments, check out:

• Your guide to virtual card rebates
• Traditional vs. virtual payments
• Mobile wallets for B2B transactions

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.

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The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own legal counsel, tax, and investment advisers.

Editorial note: This article was originally published on September 18, 2015, and has been updated for this publication.

Sources:
Forbes
“How to be good at Performance Appraisals” by Dick Grote