Accounts Payable

How To Perform a Health Check On Your Accounts Payable

May 27, 2021


Do you assume everything in your accounts payable (AP) department is going well? How do you know for sure? Inefficiencies, or even more serious problems such as fraud, might not be obvious on a daily basis. However, that doesn’t mean they aren’t lingering in the background.

AP is notoriously time-consuming for many businesses, particularly those that are still using manual processes. It can take up to 25 days to get an invoice approved when the process is done by hand. According to Levvel Research, the cost per individual invoice can be as high as USD $15 for companies that have not automated their invoice processing.

Moving to an automated AP process could bring down the average cost of processing an invoice at your company from USD $12 to $5.

The good news is that the processing time can be reduced to 2-5 days, and the cost brought right down to USD $5 or less. A few simple changes could make all the difference. But first, you need to perform an assessment of your current workflows to spot where that critical time and money could be saved.

What are the risks of not carrying out an AP health check?

If no one is complaining about getting paid late, it is easy to assume nothing is going wrong in your AP team. However, you could still be losing out financially, or taking unnecessary risks, without knowing. Alternatively, you might have identified problems with your company’s AP process, but are unsure of how to fix them. Without a health check, it might not be possible to see where you are falling short.

For most companies, the number of invoices they process each year is only increasing. That means more time and money is being wasted overall if you do not take the time to figure out where the inefficiencies are.

Manual processes are not only time-consuming and costly, but they also increase the chance of human error occurring, and make it less likely you will spot fraud when it occurs. Since the start of the pandemic, fraud has cost the US economy USD $42 billion, according to a PWC survey. Taking a forensic look at your practices ensures you have the right preventative measures in place.

How to conduct a health check

There are three main areas that you will need to look at: workflows, approvals, and fraud controls. Let’s start with your AP workflows.


First, figure out how many staff you have whose time is dedicated to AP tasks. Ask yourself these questions:

What percentage of their day is spent on:

  • data entry
  • invoice processing
  • payments
  • expense management

How many invoices do you process:

  • per month
  • per full-time employee (FTE)

Next, you want to calculate how much it costs you to process each invoice. In a spreadsheet, document management or workflow system, record the date and time each invoice is received. After the approval cycle is complete, document the date and time the invoice was approved to be paid. Subtract the two dates to find the number of days. Take the average across all invoices over a period of time eg, monthly. It all adds up, perhaps to more than you thought. Then cross reference this figure with the amount per hour each employee responsible for invoices is paid.


Looking specifically at the approvals process, it is worth figuring out how long it takes, on average, for an invoice to be approved.

Take a look at how much time your employees spend on approvals:

  • weekly
  • monthly
  • annually

Research has found that following up on invoices is a lengthy process, which can take up to 20% of a typical AP clerk’s time. Calculating exactly how much will help you to identify any bottlenecks slowing you down. Getting rid of them can also help to improve relationships between departments.

Fraud Controls

There has been an increase in fraud since the start of the pandemic. A regular review of your fraud controls is essential if you want to stay safe. Cyber criminals are becoming increasingly sophisticated so it’s more important than ever that you have a way to stay up to date on the latest scams so you can inform your team and update your controls. As you assess your fraud controls, ask yourself these questions:

Do you have regular security training for your employees?

How do you stay up-to-date with best practices?

What is your process if vendors want to change their banking information?

I have done my health check. Now what?

Once you have all that information, it’s a good idea to compare how your AP team fares compared to other industry benchmarks. This will help you assess your performance and which areas require the most work. Beanworks has a helpful tool that you can use to see how your organization ranks. By answering a few questions, you can calculate exactly how much it costs your organization to process each invoice.

It’s often been said that you can’t improve what you don’t measure. This is especially true in today’s AP departments. Setting and tracking KPIs based on industry benchmarks is an essential part of your health check. Doing so will mean you are constantly on top of what is causing you delays, inefficiencies and excessive risks, and means you are able to act in an agile way to prevent this.

One good measure of how you are doing is the cost of processing an invoice, which we have mentioned. Another good KPI to use as a benchmark is your invoice exception rate. Any invoice error costs time and money to fix, whether it is a coding error, a duplicate invoice or another issue. Figuring out how often this occurs and which errors are most common will help you to mitigate against them in future. Keep a record of each one as it happens, and at the end of the month divide the total number of exceptions by the number of invoices processed that month, then multiply by 100. This will give you a percentage figure.

Manual processes are not only time-consuming and costly, but they also increase the chance of human error occurring, and make it less likely you will spot fraud when it occurs.

For more information on useful KPIs for AP teams, consult our guide or download the white paper.

How can AP automation help?

After conducting your health check, you might have identified a number of areas where the process could be improved. With 57% of companies still relying on manual processes for their AP, you’re not alone. Thankfully, switching to automated AP such as Beanworks can help you save USD $13 on average for every invoice processed. That is USD $78,000 per year for companies processing USD $500 per month. Moving to an automated AP process could bring down the average cost of processing an invoice at your company from USD $12 to $5.

And it’s not just money you will save. With automation, there are fewer human errors and you have a more robust defence against fraud, which can bring peace of mind. You can enjoy better relationships with suppliers and vendors and take advantage of discounts when you pay on time or even early. Employees who are freed up from repetitive, monotonous tasks such as data entry can spend time on more valuable assignments.

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