Tap into key business insights and make better, more data-driven decisions with these essential procure-to-pay metrics.
For many procurement leaders, data is top of mind. According to Amazon’s 2024 State of Procurement Data Report, 98% of respondents reported having plans for investments in analytics and insights tools, automation, and AI for their procurement operations in the next few years. The goal: better use of employee time, greater efficiency, and higher cost savings.
The increased focus on analytics in particular points to growing interest in becoming more data-driven. Lucky for procurement teams, their procure-to-pay data is filled with insights that can be tapped into for better, more precise decision-making.
Keep track of these 11 procure-to-pay KPIs to make more informed business decisions and quickly spot opportunities or inefficiencies.
11 must-track procure-to-pay KPIs
1. Purchase order cycle time
Purchase order (PO) cycle time is a measurement of the total time it takes for a business transaction to go from turning a purchase requisition into a purchase order.
It’s an important component of the larger P2P cycle and a key performance indicator (KPI) that can help you measure your procurement team’s efficiency.
Tracking PO cycle time ensures that you always know how long it’s taking your team to approve and create POs and sets a benchmark that you can aim to improve over time.
2. Cost per invoice
As the name suggests, cost per invoice measures the total cost to process or draft an invoice. This is determined by measuring the effort employees spend, including any input from relevant stakeholders or time spent on administrative tasks, like printing, emailing, mailing, reviewing or 3-way matching, categorizing, submitting for approval, archiving, or inputting data into a database or system.
When it comes to this KPI, cases of inefficiency are typically linked to employees handling these tasks manually. This metric goes hand-in-hand with invoice processing costs (more on that in a bit).
3. First-time match (FTM) rate
The first-time match rate is used to determine the accuracy of the three-way matching process. The three-way matching process consists of validating purchase and invoiced totals across three key documents: the purchase order, the goods received note, and the invoice.
This matching process ensures that the items received align with what was purchased and that the payment requested is accurate to what was received. Once all three items have been verified and approved, the payment can be released to the vendor.
The FTM rate measures the quality of the documents reviewed by the accounts payable team and how accurately and efficiently employees match them.
4. Supplier lead time
Supplier lead time refers to the time it takes a supplier or vendor to fulfill a purchase order. This KPI is a key element of supplier management because it can indicate whether a supplier or vendor is performing above or below expectations. If the supplier or vendor is performing below expectations consistently, it can lead to larger organizational issues like delays or poor customer or employee satisfaction.
5. Spend under management (SUM)
Spend under management is the total direct and indirect company spend managed by the procurement team, excluding salaries or required tax or regulatory payments. This is tracked by measuring the total of all invoices processed, with special attention paid to invoices processed by approved suppliers, authorized purchases, and the accuracy of terms and pricing. All of these elements are signs of “good” spend under management if the spending is compliant with the above mentioned criteria.
Any spending outside of these parameters (or the parameters determined by the procurement team) is considered unmanaged and should be looked into as it is a business risk.
6. Payments on time
Payments on time measure the number or percentage of invoices paid on time. Keeping track of this KPI is necessary to ensure that invoices or bills are paid on time and to maintain a balanced stream of cash flow. A high percentage of payments on time is both good for the business, for procurement and finance teams, and for maintaining and strengthening supplier relationships.
7. Invoice processing time
Invoice processing time measures the time it takes to process an invoice from the time it’s received — whether that’s an email, a printed and mailed PDF, or via a supplier portal — until the payment has been posted and recorded in the accounting system.
Invoice processing activities can be tedious, time-consuming, and costly — especially when processed manually across siloed systems, disparate legacy solutions, and disconnected processes.
Because the accounts payable process is significantly influenced by other moving parts within the procure-to-pay (P2P) process, it’s critical that businesses take on a more thorough P2P solution to automate and streamline invoice processing.
8. Supplier defect rate
Supplier defect rate measures the percentage of requests fulfilled by suppliers that fail to meet quality standards. As part of the supplier management process, it’s necessary to keep up with this metric since failure to meet quality standards can lead to greater financial impact, such as reputational damage, loss of customers, or incurred costs.
Supplier defect rate is especially important for industries that are dependent on meeting quality standards like electronics, aviation, health care, or automotive. If suppliers aren’t meeting standards, then it’s best to move on.
9. Supplier diversity
Supplier diversity isn’t necessarily a KPI, but it is a key aspect of an effective supplier management strategy. A diverse supplier base ensures that commercial and social benefits are secured for the business, such as local discounts or ESG-compliant sourcing. In addition to financial and social gains, a diverse supplier base helps mitigate risks like supply chain disruptions.
10. Contract compliance rate
Contract management is an important area for procurement. Within that lies the need to measure contract compliance rate, specifically how well suppliers conform to the standards, regulations, or terms of the contract they’re bound by.
This measure is important to track because it helps ensure that contracts are being managed and executed properly until the contract terms are fully met. If a supplier has a low contract compliance rate, then it’s time to reconsider the relationship or get to the root of the issue.
11. Duplicate payment and invoices rate
If a high rate of duplicate payments are being issued or duplicate invoices are being submitted, that’s a clear sign of a broken procure-to-pay process. While it’s acceptable and understandable for this to occur on occasion, over time, these errors will snowball into larger, more costly risks.
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