Your accounts payable process represents more than just a piece of administrative housekeeping. Setting accounts payable goals will empower you to track the progress of your business and measure your success. By setting clear goals, your accounts payable (AP) team can transform the way you manage your cash flow and make progress toward your company's long-term objectives.
Still not convinced? Consider the challenges you face from slow invoice processing and other AP processes. With the right goals, accounts payable departments can play a strategic role in optimizing your business performance. Get started today by setting SMART goals with your accounts payable team.
What are some goals for accounts payable?
Accounts payable teams typically focus on three critical areas of responsibility:
- Keeping track of what you owe suppliers and vendors
- Securing approval for those payments
- Processing payments on a timely basis
While your accounts receivable (AR) team handles your cash inflows, your AP department will help you optimize the cash flowing out of your business. Inefficient processes can stifle your cash flow, impeding your ability to meet your financial obligations—a leading reason businesses fail.
AP departments, therefore, seek to optimize these core processes through accounts payable goals. Examples include the following:
- Maintaining an accurate, up-to-date database of suppliers
- Nurturing supplier relationships to gain favorable terms and potential discounts
- Paying suppliers on time to ensure smooth relationships or early payment discounts
- Maintaining financial data to ensure that cash forecasts are accurate
- Preventing mistakes and fraud
These broad goals will keep your finance teams operating at a high level of functionality, which can help optimize your working capital.
Why should you set goals for accounts payable?
Many business owners relegate their accounts payable department to a purely administrative function. But think about the importance each AP process plays in achieving your broader business objectives. Late payments and inefficient processes can radically alter your cash flow, impacting the entire organization. Conversely, setting clear AP goals will transform your AP team into a strategic part of your business strategy.
That's good news for your business and AP teams as well. By helping your employees understand their contribution to your company goals, you can improve employee engagement. That's important in an age when business leaders struggle to attract and retain top talent. Setting AP goals can help keep turnover low.
How to set account payable goals
How should company leaders set accounts payable goals? The following tips can help eliminate AP processes that waste time and money.
Audit your existing AP process
Before setting new strategic goals, consider how you currently handle your AP processes. Are you still relying on manual processes or paper invoices? These legacy AP processes can dramatically limit your ability to manage your finances efficiently.
Inefficient processes can also lead to late payments that only add to your operating costs while eroding relationships with your top suppliers. Taking inventory of your current AP system will identify areas of concern you can address with new goals.
Set SMART goals
Finance leaders may already be familiar with "SMART goals." This initialism stands for goals that are:
- Specific
- Measurable
- Attainable
- Realistic
- Time-bound
This approach is less about the goals themselves and more about the strategy for implementing them. For example, "improving efficiency" is not, by itself, a "SMART goal." But if you set a goal to implement AP automation over the next six months, you've set a goal that satisfies the need for specific, measurable, time-bound goals.
Remember: the more specific you can be with your goals, the easier it will be to measure progress moving forward.
Focus on cost reduction
AP teams can improve your organization's financial health by working to reduce procurement costs. AP leaders achieve this by focusing on three goal areas:
- Improving the accuracy of invoice processing
- Increasing the efficiency of your approval workflow
- Retaining flexibility in the face of changing external conditions (e.g., supply chain issues)
Accounts payable metrics will help you align your AP processes to reduce costs and boost your accounts payable efficiency.
7 examples of account payable goals
Your accounts payable goals should reflect your unique company culture. But companies across every industry will share a few common goals. The following are examples of today's leading accounts payable goals and objectives.
Goal 1: Saving time and money
In the world of business, time and money go hand in hand. AP departments can set goals to ensure that you save both. Accounts payable automation can streamline your approval and payments process for early payments.
Timely payments can nurture positive relationships with your vendors. Prompt payment will also prevent you from incurring costly penalties; some vendors may even offer early pay discounts. You might also save money by negotiating new contracts with your suppliers, seeking to leverage volume discounts, or using other methods to keep your costs under control.
Goal 2: Reducing errors
Errors can result in missed, late, or incorrect payments. AP teams can reduce errors by leveraging technology to minimize the need for manual data entry. Teams that leverage automation can use AI and machine learning to pull invoice data without having to make a single keystroke.
When you set accounts payable smart goals, examples of ways to reduce errors also include reviewing payment terms. That way, your financial teams comply with the vendor's payment expectations and avoid missed or late payments.
Goal 3: Training AP teams
Standardizing your AP training can bring your finance team up to speed on the latest developments and ensure your entire department operates in sync. Employee training is essential when introducing accounts payable automation or other advanced tools.
Because some businesses must meet specific compliance standards, accounts payable departments should stay up-to-date on industry regulations. Similarly, refresher courses can keep your seasoned leaders current on today's best practices.
Goal 4: Optimizing payments for better cash flow
Cash flow is the lifeblood of any business. One of the challenges that finance leaders face involves the timing of cash outflows. Days payable outstanding (DPO) reflects the time it takes for a company to meet its financial obligations.
A low DPO can spell disaster for business. Why? When a company pays its bills at the same time each month, it depletes the available working capital until cash can flows back in. As a result, companies lack the resources to seize new opportunities as they arise.
A higher DPO means that your company will retain its working capital for longer. AP teams can improve cash flow by paying monthly invoices at strategic intervals. By staggering payment, you'll maintain an even supply of cash to cover your operating expenses.
Goal 5: Increasing turnover ratio
Your invoice turnover ratio also reflects your invoice processing speed. Setting goals to increase this ratio will eliminate the danger of a backlog of invoices. Advanced automation can improve your turnover ratio by streamlining your AP process, but the turnover ratio itself will serve as one of your most valuable accounts payable metrics.
When setting SMART goals for the accounts payable department, you might zero in on your turnover ratio. Finance teams might set goals to boost their turnover ratio by 15% during their next year—a specific, measurable, and time-bound goal for the next 12 months.
Goal 6: Assessing invoice volume
How many invoices does your company typically process? Monitoring invoice volume may reveal something significant about the number of vendors you rely on. AP departments might work toward setting goals to measure the number of invoices processed each month and then use these data points to optimize their supplier network.
For example, too many invoices may point to too many suppliers. By limiting your supplier network, you may be able to take advantage of volume discounts or other money-saving opportunities. Alternatively, too few invoices may point to a limited supplier network. Expanding your network can prove valuable when one vendor experiences shortages or supply chain disruptions.
Goal 7: Improving collaboration
When accounts payable teams collaborate with other departments, it ensures that your entire organization works together to achieve your business objectives. For example, accounts payable and receivable departments can compare payment metrics and other financial data to better strategize how to regulate the company's cash flow.
How can business leaders turn this into a SMART goal? Goal setting might involve establishing a set number of meetings between department leaders or assigning each department the combined goal of improving cash flow by 10% over a year.
AP automation can help you achieve your AP goals
Thanks to the latest in AP automation, businesses are transforming the way they set and track their accounts payable goals. Advanced technology empowers your business to process more invoices than ever before while reducing errors that cost you time and money.
AI and machine learning help these digital tools adapt to evolving business needs to keep your business operating efficiently. When evaluating accounts payable goals for performance, review examples that include the following case studies.
Case study 1: Murdock Hyundai
Even a family-owned car dealership experiences complex accounting issues. At Murdock Hyundai, controller Julie Day oversaw a time-consuming AP process that involved gathering and reviewing invoices, then generating checks to pay vendors. However, because of the company's dual authorization policy, Julie and Blake Murdock, the business owner, had to sign each check.
Things changed once Murdock Hyundai implemented BILL. The company could process invoices directly through BILL's robust platform by creating electronic vendor profiles. Julie could process payments faster using ACH, and some vendors agreed to credit card payments when processed through BILL Spend & Expense.
Julie now completes her AP processes in half the time—while minimizing the floor space once occupied by physical paperwork. Best of all, the BILL Divvy Corporate cards make handling and tracking everyday expenses easier, giving Murdock Hyundai total control over its budget.
Case study 2: Galileo Learning
Galileo Learning runs over 70 different summer camps across the United States. This means that procurement teams have to step it up as warm weather approaches, but it also means cumbersome processes for handling payments. According to accounting specialist Amy Bennett, Galileo was spending up to 25 hours per week handling AP functions.
BILL made the process much faster thanks to AP automation. Not only did BILL eliminate the need for manual data entry, but it also synced seamlessly with Galileo's accounting software, Sage Intacct. And invoices are automatically routed to the right person for approval each time.
As a result, BILL saved the company 12 hours each week. That's important for the company's business objectives, especially as they expand into new territories, to ensure summertime opportunities are available to all.
Reach your accounts payable goals
How can AP automation transform your business? BILL can provide cutting-edge innovation to streamline your core AP processes and deliver faster, more accurate results. Learn more about BILL and the accounts payable process, and leverage these tools to reach your accounts payable goals.
Account payable goals FAQ
What is the main goal of accounts payable?
AP departments focus on improving financial processes to save time and money. Optimizing AP processes can minimize errors and improve company cash flow.
What is a SMART goal for accounts payable?
SMART goals are specific, measurable, achievable, realistic, and time-bound. Setting SMART goals will help you establish key performance indicators (KPIs) to track your progress toward your goals.