What is the formula to determine AP payment cycle time?

Follow

It depends on exactly what you are trying to measure. But as far as the AP & P2P Network survey, we looked at two different measures.

The first one we measured, which tells you the time it takes AP staff to actually process the invoice, is measured in days from the date the invoice arrives in AP to the date it is ready to pay. (Hopefully you have a system that can track and give you the data; then average the data to get your average turnaround time.) This may be useful when focusing specifically and narrowly on AP’s processing.

The second way we measured is ultimately more important in terms of a P2P perspective and overall performance: you measure from the date of the invoice to the date that it is ready to pay – this will include whatever time it takes for invoices to reach AP, which often is considerable – and measures the full cycle time.

That second approach gives an average turn time that is critical to know. It doesn’t do much good for AP to have a great turnaround time itself if they do not receive invoices until they’re already due or past due!

Have more questions? Submit a request

Comments