Accounts Payable Benchmarks and Best Practices

accounting benchmarking

In Business Process Benchmarking, the idea is to compare your process against the process others are using, so you understand both the level of performance that is being achieved and how it is achieved. The initial analysis showed us that the company was operating at 14% better than the Median performer level from a headcount perspective (Efficiency), but ran at a 26% higher personnel cost structure (Effectiveness) than a Median performing peer. We conducted a benchmark assessment of their various market operations to identify areas of opportunity for cost and productivity improvement, in order to consider establishing a centralized Shared Services operation. Given the post-COVID focus on lean and portable operations, it makes sense to explore which finance benchmarks will give you the strongest insights into the health of your operation, and help you target opportunities to reduce and/or refocus your staff. Benchmarking can also be used when an organization has a number of similar free-standing operations, such as retail store outlets or bank branches. In this situation, a company can measure the performance of each location and use these results to rank the locations.

accounting benchmarking

Management accounting is a powerful tool for SMEs to measure and improve their performance, especially in relation to their competitors. By using management accounting techniques, you can collect, analyze, and report relevant information that helps you make strategic decisions, identify strengths and weaknesses, and set realistic goals. In this article, we will explore how you can use management accounting to benchmark your SME against competitors and gain a competitive edge. To achieve the KPIs discussed, digitalization in accounting can have a significant impact.

Total Cost to Process Accounts Payable per Invoice Processed

For CSL, anonymity became a central feature of the system to address such concerns. As the pandemic progressed, it quickly became clear that identifying and measuring omnichannel marketing success would require companies to think outside of the box and develop solutions that effectively addressed the unique needs of modern marketing. In previous years, pharma was largely in charge of the marketing experience, sending reps to meet with customers face-to-face. Through this approach, the interaction was initiated and run on the company’s terms, with a physical understanding and record of meetings and outcomes.

Trianz leverages data points from its sister research company Trasers, with 5,000+ individual companies across 20 industries having been surveyed and assessed across five levels of maturity. In an increasingly competitive digital market, benchmarking your enterprise accounting performance and comparing to industry competitors is an excellent way to identify shortcomings in your strategy. Benchmarking will help you perform targeted upgrades on inefficient processes and technologies, while simultaneously revealing where you excel, helping to minimize investment waste. In addition to the profit-and-loss KPIs, such as gross margin or net profit (see above), there are the balance-sheet KPIs, which are important to maximizing return on capital employed (ROCE) or return on equity (ROE). Combined with absolute profit, ROCE or ROE is the ultimate measure of a practice’s financial performance.

There are many other examples of Efficiency metrics that can be applied to your organization. Controlling these costs and understanding competitor expenditure will keep your business on the right track financially. Prior to his work with IFAC, Mr. Thompson worked for Touche Ross & Co., London before going on to lecture on corporate reporting and analysis at universities in the UK, Singapore, and Malaysia.

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Benchmarking is a great way for managers to gauge how well their department or company is performing internally and in the industry as a whole. Benchmarking is also used by external users of the financial statements like investors and solvency vs liquidity creditors to see if a business’ performance meets expectations. Internal performance benchmarking is often a good place to start, but the biggest benefit comes from external benchmarking that examines both performance and practice.

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Based on the numbers, AP and AR should provide those opportunities and Accounting should offer some improvements as well. This is a very different situation than if the company was publicly traded or has outside investors to report to. However, in speaking with the Accounting team, it was determined that they were spending so much time performing and managing closing activities that they had very little time to analyze and provide insights into the company’s financial performance. The levels of investment in systems and process automation tools in order to get you to the “Top” may not deliver enough benefits to warrant that investment.

Measure performance against peers, strategic priorities and future needs, and position yourself to drive business goals. Employee satisfaction benchmarking, there are consortium that will compare your employee satisfaction survey results with the rest of your industry or employees at large. Service benchmarking, again you can do this yourself through mystery shopping, or you can use the results from services such as Trip Advisor. In recently working with a $500M CPG organization, we determined that the company’s closing cycle was 50% longer than its BOTTOM-PERFORMING peers. However, the company was privately held with no outside debt or investors, and the CEO/Owner was not demanding shorter closing cycles, as he was very close to the numbers and knew pretty much what was coming even before financial reports were issued.

What are the Four Types of Benchmarking?

APQC (American Productivity & Quality Center) is the world’s foremost authority in benchmarking, best practices, process and performance improvement, and knowledge management (KM). With more than 1,000 member organizations worldwide, APQC provides the information, data, and insights organizations need to support decision-making and develop internal skills. Blake Christian argues that comparing firm metrics against those of peers can help firm leaders set realistic goals. The problem of course is getting access to the key strategic data of the industry and competitor firms. It doesn’t help that most firms are privately held and, as such, do not publicly disclose their information. Benchmarking its performance against others, especially a peer group, adds further value and is a big step on the road to continuous improvement for any organization, accounting firms included.

You may be benchmarking your sales margins and cost base against your competitors, you may be benchmarking the grades achieved by pupils at different schools you are considering for your children’s future education. The other main approach is called Business Process Benchmarking, where you compare the processes for achieving the results as well as the results themselves. Eric brings more than 30 years of experience and a proven track record of success helping CFOs modernize and achieve peak performance in their back office to become more scalable, innovative and strategic oriented.

CSL supports pharma companies to understand their marketplace and achieve their business goals by providing consultancy, expertise and software tools that strengthen effective business intelligence. A number of organizations collect and publish benchmarks in different jurisdictions. One of the largest firm practice management survey projects of its kind is the American Institute of CPAs (AICPA) PCPS/TSCPA National MAP Survey. It collates, summarizes, and analyzes the KPIs from thousands of US practice units across a range of practice management areas, including staffing, training, and technology. KPIs are broken down by firm size and region so that it’s possible to make meaningful comparisons among firms. Participants get access to the full results when complete and, in so doing, get useful insights, including where they stand in relation to their peers.

  • Controlling these costs and understanding competitor expenditure will keep your business on the right track financially.
  • Product benchmarking, comparing the different elements of your products performance against the competition in the market place.
  • Working the math, we would need to identify opportunities to reduce about 13 FTE’s to achieve the $1M annual cost savings, or 20% of the total staff.
  • The Wilshire 5000 is also a popular benchmark; it represents all of the publicly traded stocks in the U.S.

He has a number of publications in academic journals and the professional press in the areas of ethical finance, corporate reporting, corporate governance, integrated reporting, practice management and the future of the profession. Creating this foundation of core omnichannel marketing metrics was only part of the process, as to truly provide actionable insight, companies must agree on how to interpret the data. Essentially, benchmarking helps companies to put their marketing performance into context, providing a clear understanding of how effective their strategies are performing in comparison to their competitors. For Matt and CSL commercial director Lee Ronan, this is where benchmarking can be a valuable asset. Using a syndicated and impartial benchmarking service, such as CSL’s Omni Benchmarking service for pharma, allows companies to evaluate their performance against an agreed set of omnichannel metrics. Investors use benchmarks to measure the performance of securities, mutual funds, exchange-traded funds, portfolios, or other investment instruments.

Benchmarking in practice

Additionally, management accounting assists in communicating results and actions to stakeholders. Benchmarking for accounting practices can be defined as comparing your accounting practice processes, procedures, and key performance indicators to those of other firms or accounting industry benchmarks or standards. The final step of benchmarking is to use your results to improve your SME’s performance, processes, and practices. You should use your results to identify any strengths or weaknesses, learn from the best practices of competitors or other sectors, set realistic goals and action plans, monitor and evaluate progress, and communicate achievements and challenges with stakeholders. Benchmarking is not a one-time activity, but rather a continuous process of learning and improvement. It is important to review and update benchmarking criteria, data, and results regularly in order to adapt to the changing needs and expectations of customers and the market.

  • This collection features data and practices from APQC’s Open Standards Benchmarking survey for Accounts Payable and Expense Reimbursement.
  • Once you have chosen your benchmarking criteria, you need to collect and analyze the data that will allow you to compare your SME with your competitors.
  • Company Q will study Corporation J’s performance and procedures in depth and will identify the differences between the organizations.
  • The survey data can be used to highlight strengths and weaknesses, advise of impending threats that need to be addressed, and identify opportunities that can give them a competitive advantage.
  • Companies often compare themselves to other companies in the industry or industry averages.

It is very commonly used, but many more can be used based on how the benchmark is designed. Some widely used benchmarks in the stock market are the Wilson 5000, Dow Jones Industrial Average, and the Russel 2000. Beta is a measure of the fund’s risk compared to that of the benchmark—again, MGK has matched its benchmark’s risk level (again, 1.0 indicates it has tracked, while less or more than 1.0 indicates less or more tracking, respectively). Both of these indexes are used by many to gauge the performance of the stock market as a whole, even though they only represent a fraction of the stocks listed on public exchanges. For example, the S&P 500 and Dow Jones Industrial Average are two of the most popular large-capitalization stock benchmarks in the equities market.

The Dow Jones Industrial Average comprises 30 U.S. blue-chip stocks—the stocks of well-recognized, established, and financially sound companies. The ICAEW Library can give you the right information from trustworthy, professional sources that aren’t freely available online. You are permitted to access articles subject to the terms of use set by our suppliers and any restrictions imposed by individual publishers. The life sciences industry has made proactive strides in recent years within rare disease.

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