Account Payable

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Account payable is defined as money owed by any companies/entities to their suppliers. It is for goods or services that those companies are received where particular suppliers are invoicing them with credit term of payments. Those companies should pay it at due date as the latest payment time. Payment beyond due dates are considered late payment. And, the more smaller the aging days of late payments the better account payable status of those companies.

Account Payable Spreadsheet

In accounting report, people can see it as liabilities in Balance Sheet statement. The amount should vary. It depends on time when particular companies generate the statement.

Finance managers in most companies are looking at their accounts payable operations to find opportunities for improvement. Especially to balance their cash flow. The best way to accomplish it is to establish and track Key Performance Indicators (KPIs). Key performance indicators measure the quality of an organization’s performance and provide the base-line for developing performance goals and strategies.

Some common KPIs for account payable are :

1. Total Number of Invoices Received

Finance managers who responsible for payment need to manage those invoice due dates, to make sure that their companies cash flow are balance since they need to spend their expenses to other posts, like salaries, utility bills etc. They have to strategically negotiate due dates or delay approval process of purchasing item if their financial situation is not feasible at particular time.

2. Number of Invoices Processed Per Day Per Employee

Your best employees will find ways to make invoice processing more efficient. Tracking this KPI will let you identify the things that your best people are doing, and share those tips with the entire team. This KPI also gives you a foundation for counseling an under-performing employee.

3. Average Cost to Process Different Invoice Models

Each Accounts Payable department might handle different model of invoice types. You may assign types such as exceptions, non-PO invoices or invoices from a specific class of vendor. You can use this metric to track the types of invoices that take significantly more time than others do.

4. Exception Invoices vs Total Number of Invoices

The amount of time and resources required to manage invoice exceptions is a major reason why many AP departments couldn't handle it well. Exceptions are often caused by discrepancies in PO and invoice data, missing/incorrect POs, and bottlenecks in the approval workflow.

5. Average Time to Approve

Track how long it takes to get each invoice approved and paid after receiving invoices. If your payments aren’t being processed quickly enough, you may lose discounts, or incur late fees.

6. Erroneous Payments vs Total Payments

The time and money spent to correct payment errors such as duplicate payments can put a huge strain on any AP department. Assign and track error codes for erroneous payments as a tool for identifying and resolving the causes of these errors.

7. Automated Payments vs Total Payments

If you don't have any issues in cash flow, then you might want to track this one.

Those are KPI samples that you can implement in your companies to improve performance of your AP department. This Account Payable spreadsheet is not a KPI spreadsheet, it is just a simple spreadsheet to organize all Purchase Order data in an Excel spreadsheet. Furthermore, you should use it to compute them to get your KPI metrics.

Account Payable Log and Aging Chart

This Account Payable spreadsheet consists of several worksheets:

Purchase Order Log

This is a worksheet where you can put all transaction data of your company's Purchase Orders or supplier's invoices. You can also put payment information, either part of full payment, as well as its payment date in respective columns.

Payment Terms

If you have a predefined term, you can fill it here to quicken your due date typing process.

Account Payable Aging Table

This is a summary worksheet where you can observe aging of your account payable.

Supplier List

You can type supplier names here. Dropdown list in Purchase Order Log worksheet will pull supplier names from this list.

Aging Chart

Account Payable Aging Chart

I just want to show you how to create a simple chart to visualize aging of your account payable. You can develop it into other specific charts that should you improve your account payable department performance.

There is another template for account receivable if you are looking for similar template with this one to manage your invoice payments.

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