10 accounts payable KPIs to track for better performance

Days payable outstanding (DPO) measures the average number of days a company takes to pay its suppliers after receiving an invoice. A high DPO can indicate strong cash flow management, allowing businesses to hold onto cash longer. However, if it becomes too high, it may damage supplier relationships or impact credit terms. A low DPO could mean quicker payments but may limit available cash for other operations. Finding the right balance is crucial for financial stability.

As an accounts payable KPI, DPO provides valuable insight into how well a business manages its payment cycle. Regularly monitoring DPO helps organizations optimize working capital and align payment practices with industry benchmarks. It's also a critical KPI in accounts payable that supports strategic decision-making around payment timing and vendor negotiations.

Cost per invoice is the total expense incurred to process a single supplier invoice, including labor, technology, and overhead costs. This KPI in accounts payable helps businesses understand the efficiency of their AP function and identify opportunities for cost savings.

A high cost per invoice often points to manual processes, data entry errors, or outdated systems. Reducing this cost typically involves automating workflows, integrating systems, and minimizing human intervention. Tracking this metric regularly can uncover inefficiencies that add up over time and impact the bottom line. Lowering the cost per invoice not only saves money but also frees up resources for more strategic tasks.

Finance teams should use this KPI to guide investment in technology and process improvements. An optimized cost per invoice enhances both operational efficiency and financial performance.

Invoice processed per employee measures how many invoices an individual accounts payable staff member can handle over a given period. It’s a productivity metric that reflects the overall efficiency and capacity of the AP team. A higher number suggests streamlined processes, automation, and fewer bottlenecks.

Conversely, a lower number may indicate over-reliance on manual tasks or staff training gaps. This KPI helps managers assess workload distribution, optimize staffing levels, and justify technology investments.

When combined with other metrics like cost per invoice, it provides a fuller picture of AP performance. Regular tracking can help identify trends and areas for improvement. Ultimately, increasing invoice throughput per employee boosts overall operational productivity and reduces turnaround time in the payables process.

Vendor payment errors refer to mistakes such as duplicate payments, incorrect amounts, or payments sent to the wrong supplier. These errors disrupt vendor relationships, cause financial losses, and require extra time to resolve. Tracking this KPI helps companies identify root causes—whether it’s data entry mistakes, approval issues, or system failures. A high rate of payment errors indicates the need for tighter controls and better invoice validation processes.

Reducing these errors builds trust with vendors and ensures timely, accurate payments. This metric also supports compliance with internal policies and audit requirements. Companies should establish a low error rate as a performance benchmark and implement preventive measures like automation and segregation of duties. Monitoring this KPI regularly ensures operational accuracy and maintains vendor satisfaction.

The average time for one invoice approval measures how long it takes for an invoice to move through the internal review and authorization process. Delays in approval can result in late payments, missed discounts, and strained vendor relationships. This KPI helps identify inefficiencies such as bottlenecks in communication, complex approval hierarchies, or reliance on manual workflows.

A shorter approval time indicates a more agile and responsive accounts payable process. Businesses aiming to improve this metric often implement automated routing systems and clear approval policies. Regular monitoring allows teams to flag outliers and correct recurring issues quickly. Reducing approval time enhances overall payment cycle speed and supplier satisfaction.

By focusing on this KPI, companies can boost operational performance while maintaining compliance and financial accuracy.

Invoice cycling time measures the total time it takes from receiving an invoice to completing payment. It includes all steps such as data entry, validation, approval, and payment processing. This KPI helps companies evaluate how quickly and efficiently their accounts payable function operates.

A shorter cycle time usually reflects a well-automated and streamlined workflow, while longer times may signal inefficiencies or system issues. Tracking this metric over time can reveal trends, bottlenecks, or areas needing automation. Improving invoice cycling time helps businesses take advantage of early payment discounts and maintain strong supplier relationships. It also reduces the risk of late fees and compliance problems.

Setting benchmarks and continuously reviewing this KPI can drive performance improvements across the AP process.

The percentage of invoice exceptions represents the proportion of invoices that cannot be processed automatically due to discrepancies or missing information. These exceptions often involve mismatched purchase orders, incorrect pricing, or missing approvals.

A high rate of exceptions slows down the accounts payable process and increases manual intervention. This KPI is critical for identifying process weaknesses or a lack of standardization in procurement and invoicing. Reducing invoice exceptions improves efficiency, lowers processing costs, and enhances vendor satisfaction. Monitoring this metric helps businesses prioritize root cause analysis and invest in better systems or training.

A low exception rate reflects strong internal controls and effective supplier collaboration. By minimizing exceptions, companies can increase the percentage of straight-through processing and improve the overall health of their AP operations.

Top payment method refers to the most frequently used payment channel for settling vendor invoices, such as ACH transfers, paper checks, wire transfers, or virtual cards. Understanding this KPI helps companies assess payment efficiency, cost, and security. For instance, relying heavily on paper checks may indicate outdated practices and higher processing costs.

On the other hand, digital payment methods like ACH or virtual cards offer speed, better control, and lower risk. Analyzing the top payment method enables businesses to evaluate the effectiveness of their current systems and explore more strategic options. It also helps identify preferences of suppliers, improving vendor experience.

Companies that shift toward more efficient payment methods often gain better cash flow visibility and reduced fraud risk. Monitoring this KPI supports smarter financial decisions and modernizes the AP process.

Accounts payable expense as a percentage of revenue measures how much a company spends on managing its AP function relative to total income. It includes costs like staffing, software, equipment, and other operational expenses. A lower percentage suggests greater efficiency and better resource management. This KPI allows businesses to benchmark AP performance against peers and track improvements over time.

A rising percentage may indicate growing inefficiencies, manual processes, or a lack of automation. Tracking this metric helps identify opportunities to cut costs without compromising quality. It also supports budgeting decisions and financial planning.

Finance teams use this data to justify investments in technology and workflow improvements. Maintaining a balanced ratio ensures the AP function adds value without draining company resources.

The “percent of invoices processed straight through” refers to the proportion of invoices that require no manual intervention from receipt to payment. This KPI indicates the level of automation and process efficiency in the AP function. A high percentage reflects a streamlined workflow, accurate data capture, and strong system integration.

Businesses with low straight-through processing often face delays, errors, and increased costs due to manual handling. Tracking this metric helps identify how well automation tools are working and where human input is still needed. Improving this KPI can significantly reduce processing time and enhance supplier satisfaction.

It also frees up staff to focus on value-added tasks rather than repetitive data entry. A strong straight-through rate contributes to faster cycle times and better overall financial performance.