Efficiency in invoice processing: 10 key KPIs

Invoice processing is a crucial part of any organization, but it can also be a time-consuming and complex process. Fortunately, Key Performance Indicators (KPIs) provide a valuable tool to measure and improve the effectiveness of this process. By using these KPIs, you can optimize the invoice processing process, allowing you to meet financial obligations on time and leave more time for other work. Curious about the 10 most important KPIs for more efficient invoice processing? We list them for you!

1. Average processing time

This KPI measures the average number of days to process an invoice – from receipt to approval and finally payment. Shorter processing time leads to more efficient processes and ensures suppliers are paid on time. For example, if the average invoice processing time is 15 days, you can set goals to reduce it to 10 days. This can be achieved by automating workflows and reducing manual work.

2. Initial lead time

The time that elapses from the time the invoice is received to the initial assessment is important. The shorter this initial turnaround time is, the less delay it causes in the follow-up process. Imagine invoices currently wait an average of 3 days for initial review, then implementing notifications for incoming invoices and assigning tasks to specific approvers can help shorten this process to 1 day.

3. Accuracy of data entry.

Data entry errors can lead to costly consequences. This KPI measures the level of accuracy in data entry and helps identify potential problems early. For example, if many discrepancies are detected between purchase orders and invoice data, it is advisable to incorporate additional validation steps and make better use of automatic matching to minimize manual errors.

4. Number of invoices per employee

By measuring how many invoices an employee can process in a given period, organizations can effectively distribute their workload and avoid potential overload. If an employee currently processes 100 invoices per month, but their productivity allows them to process 150 invoices, then adjusting the division of labor can provide a balanced workload and reduce invoice turnaround time.

5. Percentage of invoices without associated fees or payment reminders.

A high percentage of invoices that are paid on time, without additional dunning fees or payment reminders, shows that the invoice processing system is working well and that suppliers are satisfied. For example, if the current percentage of invoices without additional fees is 80%, you can set goals to increase this to 90% through better monitoring of payment terms and streamlining the approval process.

6. Percentage of electronic invoices/digital invoices/paper invoices

Increasing the percentage of electronic invoices lowers processing costs. Discussing these delivery methods with suppliers can reduce inefficient paper invoices. It is worth exploring how much time is saved by electronic invoices and what costs are saved compared to paper invoices.

7. First approval rating

A high initial approval rate indicates that invoices are approved in one go, reducing the number of recurring corrections and speeding up the process. For example, if the current rate of invoices being approved in one go is 50%, identifying common corrections and providing clear instructions to approvers can help increase this rate to 80%.

8. Invoice processing fees

This KPI tracks the total costs associated with processing invoices, including personnel and system costs. By monitoring these costs, organizations can identify savings and address inefficiencies. Identify what factors affect costs, such as manual processing and errors, and consider implementing a smart, automated invoice processing system to reduce costs.

9. Average number of steps in the approval process

A shorter approval process with fewer steps indicates an optimized invoice processing system that saves time and resources. Assess your current approval process and see where unnecessary steps or potential bottlenecks can be addressed. Simplifying the process can reduce the number of steps leading to faster approval.

10. Percentage of invoices outside existing contracts or agreements

This KPI allows finance professionals to anticipate approaching costs and make targeted forecasts for management. It can also signal improvements needed in the procurement process to reduce unauthorized purchases and increase control.

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