Tracking the Payments Numbers That Count

There are more numbers for payments departments to focus on than just the amounts written on the checks. Those payments that go out affect the company’s bottom line, and while the payments department makes sure the necessary authorizations and approvals are in place, you don’t have control over them.

There are other numbers you do control that also affect the bottom line. Tracking these metrics lets you quantify the payments process itself and identify changes that can benefit that number. Begin a metrics program, but first decide what you hope to gain by collecting the metrics. Too many metrics can overwhelm you with numbers and make it difficult to decide where to begin to make changes. Think about the numbers you can gather in each of these categories, and then identify a reasonable set to track.

Invoice Numbers

Track the number of invoices outstanding and how many are overdue. Other important characteristics to track include how many are duplicates and how many are disputed or sent to an exceptions queue for other reasons. Are there common factors underlying the exceptions?

Payment Numbers

Track the amounts being paid out each month. How many late fees are being paid compared to early payment discounts earned? What percentage of available discounts are you actually receiving? Look for ways to capture more discounts, such as assigning higher priority to processing invoices where discounts are available.

People Numbers

How many people are in your payments department, and how many touch a typical invoice before it is paid? How many invoices is each employee processing per month? How many errors are made per person? Think about whether you could improve these numbers by adding people, by providing additional training, introducing different software, or by having staff specialize on different kinds of invoices.

Process Numbers

How much time does processing a typical invoice take from receipt to payment? How much of that time is actual “processing” time versus waiting to be looked at? Break the number down even further to see how long is spent in each step of the payment process. How much time is spent matching invoices to purchase or resolving invoices in the exceptions queue? How much time is spent responding to inquiries from suppliers asking about when they will be paid?

Expense Numbers

Measure how much your payment process costs you in terms of salaries, the cost of checks, the cost of mailing, and the cost of storage for retained documents. What is the overall process cost per invoice? How do costs differ for different types of invoices and payment methods?

Use Your Numbers

Once you have your metrics, you can compare them to industry standards to determine how well you are doing. The metrics can also help you identify where your biggest payment process problems are and set goals for improvement, including reducing the cost of the payment process, streamlining the process and increasing efficiency, and increasing management’s control and oversight of the payment process.

With metric-driven goals in mind, the metrics can also guide you in evaluating potential improvements, including payment automation software and provide a means to assess the impact of any changes you make.

The benefits of changes driven by metrics and comparison against best performers can be significant. Ardent Partners’ 2014 ePayables report showed that top performers have exception rates just half the normal level and process invoices more than four times as fast at half the speed. If you can use your metrics to reach that level of performance, you’ll have used numbers that matter in a way that matters.