Tracking the right key performance indicators (KPIs) is essential when using accounts payable outsourcing services. These metrics help you evaluate efficiency, accuracy, compliance, and cost-effectiveness—all critical factors for a high-performing AP process.

In this article, we’ll explore the most important KPIs you should track to ensure your outsourced AP provider is delivering value and aligning with your business goals.

1. Invoice Processing Time (Cycle Time)

Definition: The time it takes from when an invoice is received to when it’s fully approved and ready for payment.

Why it matters: This KPI reflects the efficiency of the AP workflow. A long processing time may indicate bottlenecks in the approval chain, poor communication, or lack of automation.

Industry benchmark: Best-in-class AP departments often achieve invoice cycle times of less than 5 days, while the average may range from 10 to 15 days.

Goal: A shorter cycle time can improve cash flow management and allow you to take advantage of early payment discounts.

2. Cost per Invoice Processed

Definition: The total cost associated with processing a single invoice, including labor, software, infrastructure, and outsourcing fees.

Why it matters: One of the biggest advantages of accounts payable outsourcing services is reducing operational costs. This KPI helps you determine whether outsourcing is truly delivering cost savings.

Industry benchmark: Companies using automation and outsourcing often reduce their cost per invoice to $2 to $4, while manual processes may cost $10 to $15 or more.

Goal: Continuously lower this cost while maintaining or improving accuracy and compliance.

3. Invoice Exception Rate

Definition: The percentage of invoices that cannot be processed automatically and require manual intervention due to discrepancies (e.g., missing data, mismatched purchase orders).

Why it matters: A high exception rate can slow down the AP process, delay payments, and increase the risk of errors. It also increases workload for your team and the outsourcing provider.

Goal: Aim for an exception rate of less than 10%, and work with your provider to reduce exceptions over time through better vendor communication and process optimization.

4. On-Time Payment Rate

Definition: The percentage of vendor invoices paid on or before the due date.

Why it matters: Timely payments help maintain strong supplier relationships, avoid late fees, and may enable you to secure early payment discounts. A low on-time payment rate can also indicate inefficiencies in your AP process.

Goal: Maintain an on-time payment rate of 90% or higher. With effective accounts payable outsourcing services, this should be easily achievable.

5. Early Payment Discounts Captured

Definition: The percentage of available early payment discounts that your company successfully takes advantage of.

Why it matters: Early payment discounts can significantly reduce the cost of goods and services. If your AP process is slow or disorganized, you may miss out on these savings.

Goal: Work with your provider to improve invoice turnaround time and increase the number of discounts captured.

6. Duplicate Payment Rate

Definition: The percentage of payments that were issued more than once for the same invoice.

Why it matters: Duplicate payments result in financial loss, wasted time on recovery efforts, and strained vendor relationships. A reliable accounts payable outsourcing service should have strong controls in place to prevent these errors.

Goal: Strive for a 0% duplicate payment rate, though anything under 0.1% is considered acceptable in large-volume environments.

7. Vendor Inquiry Response Time

Definition: The average time it takes to respond to vendor inquiries regarding payment status, invoice issues, or disputes.

Why it matters: Timely responses to vendor questions build trust and improve your reputation as a business partner. This metric also reflects the level of support and communication provided by your outsourcing partner.

Goal: Maintain a response time of 24 to 48 hours for vendor inquiries.

8. Percentage of Electronic Invoices

Definition: The percentage of invoices received electronically (e.g., through email, EDI, or supplier portals) versus paper.

Why it matters: Electronic invoicing reduces manual data entry, speeds up processing, and improves data accuracy. A modern accounts payable outsourcing service provider should encourage and support electronic invoicing.

Goal: Aim to receive at least 80% of invoices electronically.

9. Payment Accuracy Rate

Definition: The percentage of payments made without errors, including correct amounts, dates, and payee information.

Why it matters: Payment errors can damage vendor relationships, create compliance risks, and lead to rework and refunds. This KPI helps measure the precision of your AP process.

Goal: Maintain a payment accuracy rate above 99.5%.

10. Time to Resolve Exceptions

Definition: The average amount of time it takes to resolve invoice exceptions or discrepancies flagged during the approval or validation process.

Why it matters: Long exception resolution times slow down the entire AP process and can lead to late payments or missed discounts.

Goal: Resolve exceptions within 2 to 3 business days, depending on the complexity.

Aligning KPIs With Business Goals

The KPIs above are more than just numbers—they offer critical insights into the performance of your accounts payable outsourcing services. Regularly reviewing these metrics with your provider can help identify improvement areas, reduce inefficiencies, and ensure you’re getting a strong return on investment.

When setting up your outsourced AP program, it’s essential to define these KPIs in your Service Level Agreements (SLAs). Doing so ensures accountability and provides a benchmark for evaluating the effectiveness of your outsourcing partner.

Final Thoughts

Choosing to outsource your accounts payable function is a big step toward improving financial operations. But to ensure long-term success, you need to actively monitor how well the partnership is performing. Tracking the right KPIs will give you a clear picture of cost savings, process efficiency, and vendor satisfaction.

A reliable accounts payable outsourcing service won’t just deliver day-to-day processing—they’ll collaborate with you to meet strategic goals, provide transparency through reporting, and continuously improve.

Make sure your provider not only understands these KPIs but can demonstrate consistent results that align with your expectations.