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Welcome back to our Best Practices for AP Approval Workflow blog series! In the previous article, we discussed how to ask the right questions that help you identify clients’ common bill pay challenges and the impact it may have on their business. To further help you jump-start discussions, we also provided an Approval Workflow Checklist to help you document their current process.
Now we’ll move on to Key Performance Indicators (KPIs). More specifically, how to use aggregate client data to identify the right set of KPIs—the time and cost resources allocated to their approval process. Indicators of areas in need of refinement to develop efficiencies, avoid late fees, and reduce AP pain points altogether.
Your clients can’t begin to understand where they are today with process efficiencies, time, and cost if you aren’t tracking these indicators. When you identify key performance indicators, it provides a repeatable, structured process within which you consistently and accurately measure goals against outcomes—building a foundation for workflow changes.
KPI 1: Average time spent on manual data entry
Depending on the business, the bill pay process can range from simple to highly complex, encompassing multiple systems for data entry. This leads to manual input (hello higher risk of error) and duplication of work.
For the sake of efficiency and reducing human-driven errors, it’s imperative to reduce manual tasks like data entry, routing, or signing paper checks. To accomplish this, you must first calculate the average time associated with manual tasks. Measuring time will help clients see just how much time and effort is wasted on paper-driven, non-automated work. And in comparison, the hours (even days) they can save when AP workflow is automated.
Advanced systems like BILL’s, which come equipped with AI functionality, can automate the bill pay process from start to finish—greatly reducing time spent on manual processes.
A solution with AI can even help prevent duplicate payments, typos, and other errors that create exceptions.
KPI 2: Average time to approve a bill
Bill approval should be fast, efficient, and accurate; however, if clients are adhering to manual processes, this isn’t always the case for them.
The goal here is to simplify the process and remove obstacles so stakeholders can approve bills in a timely, highly efficient, and digital manner. This helps business owners get out of the back office so they can focus their attention on profit-building efforts to grow and thrive. After all, they likely didn’t start their enterprise because they’re passionate about paying bills.
Bill pay technology today offers the ability to sign off on bills anytime, anywhere, and from a mobile device—timestamped and attached to an audit trail.
For all these reasons, this KPI should be high on the list. Be sure to get a current measurement on the average time from bill creation to payment approval for an accurate comparison to results collected, post-automated workflow implementation.
KPI 3: Average time to pay a bill
Applying the above KPIs makes easier work of calculating this indicator. The goal is to measure the amount of time it takes from receipt of an invoice to payment submitted to a vendor.
Progressively reducing the time allotted to pay bills can make a big impact on bill pay costs (think fewer staff hours or reallocating those resources elsewhere), reduce late payment fees, and free the client’s time to redirect effort to other areas of business. It’s a huge win all around when automation is at the center of the AP workflow.
KPI 4: Total fees paid
Late fees translate to money down the toilet. Regularly measuring total late fees (and other associated fees) paid is crucial if clients are to reel in payment costs and additional money going out to vendors—as well as maintain positive vendor relationships.
By improving this KPI, your clients can save large sums of cash over time and preserve vendor relationships and their reputation.
KPI 5: Total cost of materials
The materials that make up a manual bill pay process can come with a hefty price tag. Check stock, postage, envelopes, and file management are all part of the equation and can quickly add up. Consider also that the higher the transaction amount the bigger the price.
Stay focused on this KPI to help clients understand these “concealed” costs and how to reduce them.
An advanced bill pay solution allows you to cut most, if not all, physical materials costs.
KPI 6: Average cost to pay a bill
Data speaks volumes. According to this Goldman Sachs Equity Research report, the average business using paper checks is paying up to $22 per transaction. Yikes!
This cost is the sum of all the previous KPIs mentioned—complete with related fees, the time it takes to do it, materials costs, and more.
This figure often stays “out of sight, out of mind” and may be hurting the client’s bottom line more than they realize.
The hard fact is that B2B payments are an exceedingly inefficient market with a lot of room for improvement. Staying on top of this KPI can help clients save a great deal of money over time as they improve their bill pay workflow.
The opportunity to help clients save money on B2B payments is massive!
Stay tuned for even more…
Starting a conversation with clients is the first step to transitioning them to an automated bill pay workflow. Identifying and tracking top KPIs is the next big step.
Once clients have a firm grasp on how they can improve efficiency, cut costs, and save time, they’ll be far more motivated to jump the manually navigated ship and move on to smoother automated waters. Start with the KPIs laid out for you here as you continue to move clients forward to bill pay bliss.
Be sure to come back for the final installment of this three-part series where we’ll conclude with a clear roadmap for implementing an end-to-end automated bill pay workflow.
Access the complete guide, Accounts Payable Approval Workflows - Best Practices, for detailed insights, tips, and tactics on helping clients move to a structured and automated AP process.