A Guide to Accounts Payable Analytics in 2024

Making and executing strategies based on data is very important for today’s CFOs. Accounts payable analytics can help support strategic decisions by measuring their effectiveness. 

Accounts payable doesn’t only consist of the simple function of paying back vendors for purchase made on credit. It is a very important strategic task that can make or break cash flow management of a company. It is essential to make the right decisions when managing accounts payable. 

What is accounts payable analytics?

Accounts payable analytics is the process of analyzing accounts payable data to derive actionable information. Companies use this information to make strategic changes to their accounts payable processes. 

Benefits of accounts payable analytics

Accounts payable analytics can be beneficial to companies in the following ways: 

Spend management

Accounts payable analytics can help companies improve their spend management tactics and identify cost saving opportunities easily. Lowering costs by using analytics is necessary in maintaining a healthy cash flow. 

Vendor performance analysis

Analyzing vendor performance and vendor management are important parts of accounts payable. A company’s vendor should match their business needs by giving lenient payment terms and delivery high quality goods in time. Vendors with strict and short payment terms and late deliveries are reconsidered and better negotiated with. 

Identifying bottlenecks

Analyzing payment timelines can help companies discover bottlenecks in their procedures and solve them to make accounts payable more efficient. 

Understanding spend patterns

Accounts payable analytics help companies understand their spending patterns better. This helps them budget better for future expenses and plan purchases accordingly. 

Ensure timely payments

Analyzing accounts payable data helps identify which payments are due soon. Good tools help you pay invoices on time with the help of reminders. 

Important accounts payable KPIs to track

Accounts payable KPIs are key metrics that help you analyze your accounts payable processes well. Keeping an eye on these important KPIs can help finance teams better manage their accounts payable processes. 

Cost per invoice

The average cost per invoice is an important metric indicating how cost effective your accounts payable processes are. 

Accounts payable invoice costs include employee salaries, cost of payment processing and any other software costs. 

Days payables outstanding

Days payable outstanding or accounts payable days is the measure of how many days on average a company takes to pay back its vendors. A high DPO indicates longer payment terms or more invoices paid after the due date. A low DPO can also be an indicator of bad cash flow management. 

Average time to payment

Average time to payment refers to the time taken to process an invoice from receiving it to payment. Average time to payment differs from accounts payable days as companies might withhold payment to maintain cash flow even when an invoice has been processed.

This is an important KPI to measure employee efficiency and identify bottlenecks. 

Invoices processed per day per employee

The number of invoices processed per day per employee is a good indicator of whether a company’s current headcount is suitable for the volume of invoices received. It also helps measure employee productivity and helps make decisions to change processes accordingly. 

Spend percentage by payment method

Spend percentage by payment method is an indicator of which payment methods are popularly used for paying vendors. Different payment methods require different amounts of processing fees. Check payments are also time consuming for accountants as printing and mailing checks can be a hassle. More companies nowadays prefer credit cards with attractive rewards or cashbacks. 

Why manual accounts payable analytics is challenging

Accounts payable analytics is an important task, however manual analytics can pose many challenges. 

Managing paper invoices

When a company manages accounts payable manually, they deal with a lot of paper invoices. Paper invoices require additional storage costs and are hard to keep track of. They can also easily be damaged. 

Lack of centralized data

A lack of centralized data on one platform can make data collection and cleanup difficult and time consuming for analysts, posing a challenge in the analytics process.

Incomplete data

Manual transactions, especially tail spend can often go unnoticed. This would pile up to incomplete data being available hindering correct analysis. 

Incorrect data

Manual processes are prone to human errors. Having incorrect payment and invoice data can also skew the analysis, leading to wrong insights. 

Why should you consider automating accounts payable processes

Accounts payable automation not only helps companies automate repetitive manual processes but also centralizes important invoice data to facilitate better accounts payable analytics. This software can be accessed remotely from anywhere in the world, making collecting and managing data easier for analysts. 

Some software like ClearTech also provides an inbuilt interactive AP, spend and savings dashboard to help you make the right decisions. ClearTech also gives actionable insights like spikes in line item amount or quantity on the invoice processing screen itself, allowing you to catch mistakes in invoices or vendor fraud before processing payments. It also creates elaborate accounts payable audit trails for future audits, ensuring vendor and internal compliance. 

Conclusion

• Accounts payable analytics involves analyzing AP data to derive actionable insights and make strategic decisions. 
• Accounts payable analytics can make or break the cash flow of a company. 
• Some benefits of AP analytics include spend management, vendor performance management, identifying bottlenecks in procedures and timely payments.
• Accounts payable cost per invoice, days payables outstanding, average time to payment, invoices processed per day per employee and spend percentage by payment method are some important accounts payable KPIs. 
• Manually processing accounts payable can become challenging due to managing paper invoices, lack of centralization, and incomplete or incorrect data. 
• Automating accounts payable analytics helps reduce analyst’s workload while providing real-time advice.