As finance departments evolve, finance leaders need to be skilled in measuring what’s working and what’s not. The higher level of insight into the effectiveness and efficiency levels of their finance operations, such as accounts payable (AP), the easier it is to identify areas of improvement.
Benchmarking KPIs is something every AP team should be doing. But how many are actually benchmarking effectively?
The truth is, there may be some room for improvement with choosing the right KPIs to benchmark.
5 Tips for Choosing and Benchmarking KPIs
- Align KPIs with organizational goals
By aligning KPIs with organizational goals, SSCs can ensure that company-wide efforts are being maintained. For example, your organization may have a green initiative to reduce the amount of paper usage. With this goal in mind, your finance SSC may be particularly interested in the number of paper invoices it receives.
- Understand what you intend to do with the data before you collect it
When measuring KPIs there needs to be an end goal in mind so that actionable items can be created. For example, you may have an upcoming AP automation project in the next 12 months. As a result, knowing there are many challenges in manually processing invoices, it makes sense to measure data that can tell you where the greatest area of improvement exists so that you know which areas of AP needs to be focused on first (e.g. invoice receipt, approval workflow, supply chain finance, etc.).
- Evaluate KPIs consistently over time
Benchmarking KPIs in your SSC shouldn’t be a one and done kind of thing. Trends are constantly coming and going, but benchmarking should be a consistent, ongoing effort in order to improve your finance operations.
- Benchmark KPIs against a large sample
At first glance, benchmarking your KPIs against your competitors makes sense. However, your competitors’ KPIs shouldn’t be the only ones you benchmark against. It’s important to evaluate your data against a variety of different SSCs (e.g. best-in-class, different industries, etc.). This will allow you to have the most holistic view of where your SSC stands and how you can achieve greater efficiency and cost-savings.
- Take action as a result of benchmarking meaningful KPIs
Benchmarking is only the beginning of what your company should be doing with its data. After all measurements have been made, action should be taken or plans should be made to boost process efficiency. Without the important analytics KPIs provide businesses, they would never know where they stand against competition — and without taking action on those insights, they’ll never be able to stand up to competition.
Want to learn more about accounts payable KPIs and dashboards? Download this eBook, 5 Accounts Payable KPIs Worth Tracking: Maximize Results with Real-Time Analytics & Dashboards.