With nearly 30 years of finance and accounting expertise, I’m excited to share my recommendations for accounts payable goals and objectives.
This comprehensive list will help you accelerate progress, whether you aim to optimize an existing accounts payable (AP) operation, launch a new one, or prepare for a performance review.
I’ll cover aligning your goals to department objectives and crafting SMART goals for accounts payable to maximize performance.
Accounts payable management significantly impacts cash flow, vendor relationships, and more. So, let’s dive into these actionable examples that will allow your accounts payable team to work smarter and drive value for your organization.
My recommended performance goals for accounts payable include the following:
Now let’s examine each of these accounts payable goals in more detail. Doing so will provide context behind my recommended goals to help you understand their importance.
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Conduct a comprehensive audit and map your organization’s current procure-to-pay process from beginning to end.
Doing so will allow you to identify opportunities for improvement, including visibility into bottlenecks, redundancies, and process gaps. Your assessment lays the foundation for achieving many other accounts payable goals.
Set an accounts payable goal to make vendor payments on time. However, paying on time may mean different things to different companies.
I recommend paying within the terms you and your suppliers have agreed to. However, some companies must make payments several days late to conserve cash.
I recommend paying early when your suppliers offer discounts for doing so. Early payment discounts are an excellent way to reduce costs.
Set a goal to reduce late payment fees. Track and quantify late fees over time. Break the reason for late payment down by root cause. Identify solutions and implement them.
Outflows for accounts payable are one of the most significant uses of cash for many companies. As a result, assist the finance function in forecasting company cash flows by providing projections of money needed to pay suppliers by day, week, and month.
Ensure all vendor contact information is:
Make vendor relationship management one of your explicit accounts payable goals.
Strong vendor relationships lead to better contract terms, higher quality products and services, and a greater willingness to partner.
Stronger partnerships with suppliers benefit not only accounts payable but procurement and the entire organization.
The accounts payable trial balance must reconcile to the general ledger monthly.
Identify and resolve differences before the next month-end closing cycle. The accuracy and credibility of your company’s financial statements depends on it.
Look for opportunities to improve internal accounting controls over the accounts payable function. Here are several requirements to put in place:
Adequate internal accounting controls call for proper segregation of duties. Thus, ensure different team members perform designated activities within the procure-to-pay process.
For example, strive to separate the following duties:
1. Vendor selection from master file setup
2. Purchase order preparation from purchase approval
3. Recording and processing transactions from check signing
4. Access to general ledger and bank reconciliations from other activities
Furthermore, make sufficient management supervision of accounts payable available for small departments where segregation best practices are impossible.
Use your process map created in goal #1 to identify areas to automate with technology, streamline, and eliminate unnecessary activities.
Identify and track key performance indicators (KPIs) for the accounts payable function. Several suggestions for accounts payable KPIs include:
Report your KPIs and other relevant information to procurement, controllership, and finance management. Demonstrate your leadership value to the company.
The effectiveness and efficiency of the accounts payable function depends on your team member’s abilities, skills, and productivity.
Thus, hire the right people. Put those people in the proper organizational structure. Then train them, treat them well, and help them develop their careers.
Comprehensive accounts payable policies and procedures are crucial for providing standardized guidelines and expectations for the team.
Well-defined and documented policies will:
Okay. That’s today’s 15 accounts payable goals examples.
Next, I will provide accounts payable objectives every AP department should have and explain how to align your goals with these objectives.
Most importantly, discussing the relationships between goals and department objectives with your manager can make a positive impression during your performance review.
Here are the five primary objectives every AP department should have:
Next, I will align today’s AP department goals with these accounts payable objectives.
A critical accounts payable objective is accurately satisfying supplier payment obligations on time.
To do so, focus on these goals:
Operating accounts payable efficiently involves utilizing process automation, data analysis, and best practices to increase productivity.
To operate efficiently, focus on these goals:
Maintaining up-to-date and accurate accounts payable records is crucial for proper financial accounting, compliance, timely payment, and decision-making.
To maintain accurate and timely records, focus on these goals:
Safeguarding company cash involves implementing financial controls and procedures to prevent fraud, ensure legitimate payments, and protect money from misuse, abuse, or theft.
To safeguard company cash, focus on these goals:
A core accounts payable objective is coordinating with all departments, like operations, procurement, and sales, to align activities, improve processes, and provide excellent service.
Focus on these accounts payable goals examples to collaborate effectively:
Note that the last point about high-performing staff applies to all goals and objectives for accounts payable. Good people are a must to achieve positive results.
Finally, use a proven goal-setting system for your accounts payable goals. I recommend setting SMART goals for accounts payable.
To set SMART goals for accounts payable, write them down. As you document, make sure each of your goals meets the following criteria:
Specific. Be as detailed as possible about exactly what you want to achieve. Thus, make well-defined, clear, and unambiguous goals.
Measurable. Determine how you will measure progress and completion of each goal. Identify the metrics to track progress and quantify achievement.
Achievable. Choose and set challenging goals. However, save time by making only possible plans. Make sure to take into account available resources, capabilities, and obstacles.
Relevant. Each goal should be relevant to your current role, the accounts payable function, and the company.
Time-bound. Every accounts payable goal you set should have a deadline for review and completion. Long-term goals should have interim milestones.
Okay. That’s all for today. Next, to wrap up, I have some final thoughts.
First, accounts payable are a critical part of the procurement-to-payment process. Furthermore, paying bills when due is essential for maintaining the viability of your company and enhancing vendor relationships.
So, satisfy the objectives of accounts payable by setting and achieving the proper goals.
Good luck making your accounts payable department the best it can be.
If you are hungry for more business goal-setting advice, check out my entire archive of articles.
Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.
