Establishing KPA/KPI or Performance Metric For Outsourcing The Accounting Function (Part 3)

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It’s crucial to maintain certain performance metric so that the company can measure the efficiency of  the accounting and bookkeeping services provided by the outsourced providers.

The key performance metric can be demarcated into the different areas if the functions are being outsourced:

 Transactions Processing:
                                       
· Average cost per transaction

Strictly the average cost per transaction does not varies with the volume. This change unless there is a contractual agreement to alter the cost per transaction if there is significant change in the volume of transactions. This cost is easily obtained from the provider billing statement and should be tracked on a trend line to spot any changes to the per-unit cost.

· Error rate on processing
It’s important to have an almost zero free error rate otherwise it will have great impact on the customers. Therefore,the company should schedule periodic audits of all processed transactions to determine the percentage of errors in such areas as billing addresses,accounts payable matching and others
 

· Average turnaround time like payment of employee expense reports ( staff) or to the creditors
Periodic checks should be done to ensure that the agreed average turnaround time to pay the above is on target otherwise there will serious repercussions to the company’s business

· Average time to resolve errors

· Timeliness of processing like invoicing customers on time

· Percentage of invoices paid on due date

· Percentages of payment discounts taken

 Bookkeeping and Accounting Services:
· Time to release financial statement
This can be measured by the number of days lag between the end of the reporting period and the receipt date.

· Number of percentage of material irregularities
This can be determined by the amount which the financial statements are incorrect,and derive a percentage of inaccuracy based on how far off the profits are from what they should have been.

· Accuracy of accruals
This can be reviewed by looking at the calculation used for the accruals. · This can be determined by the amount which the financial statements are incorrect,and derive a percentage of inaccuracy based on how far off the profits are from what they should have been.

· It’s important to have an almost zero free error rate otherwise it will have great impact on the customers. Therefore,the company should schedule periodic audits of all processed transactions to determine the percentage of errors in such areas as billing addresses,accounts payable matching and others

• Establishing Control Points When Outsourcing The Accounting Function (Part 2)
• What are the advantages and disadvantages of Outsourcing The Internal Audit Department of a Company. Give some KPA/KPI to measure the performance of the outsourced provider.
• What are the Reasons,Risks and Opportunities when Outsourcing The Accounting Function of a company ( Part 1)
• Order-To-Cash Cycle:Definition,An Overview,Benefits,KPA and KPI
• KPA/KPI:Practical Challenges In Implementing Targeted Performance Management (TPM)
• Balanced Scorecard:Examples Of Internal Process Perspective KPI
• EXAMPLES OF SOME OF BEST-IN-CLASS PERFORMANCE METRICS USED FOR OPERATIONAL KPI ( Part 2 of 3)