What is the cycle time of accounts payable?
The cycle time of accounts payable is the average number of days a company takes to receive an invoice from a supplier, process it, and issue the payment. In most businesses, this typically ranges between 30 to 45 days, but efficient Accounts Payable Automation can reduce it significantly, sometimes to less than a week. A shorter cycle time improves vendor relationships and cash flow management, while longer times may indicate process inefficiencies.
Why Does Accounts Payable Cycle Time Matter?
Accounts payable (AP) cycle time directly affects a company’s working capital and supplier trust. Faster cycle times mean:
- Stronger vendor relationships.
- Lower chances of late payment penalties.
- Better visibility into cash flow.
On the other hand, delays in AP processing can create cash bottlenecks and damage supplier credibility.
If you’re looking to automate invoice processing and shorten your AP cycle time, check out our Accounts Payable Automation solutions.
How to Calculate Accounts Payable Cycle Time
The formula is straightforward:
AP Cycle Time = (Date of Payment – Invoice Received Date) ÷ Total Number of Invoices
For example, if invoices are typically paid 35 days after receipt, the cycle time is 35 days. Companies can measure this monthly, quarterly, or annually to benchmark efficiency.
Best Practices to Reduce AP Cycle Time
- Automate invoice capture & data entry – reduces manual errors.
- Use AI-driven approval workflows – speeds up manager approvals.
- Enable electronic payments – faster than paper checks.
- Set clear vendor terms – avoids confusion and delays.
- Regularly monitor AP KPIs – track performance improvements.
Learn more about our AI Invoice Processing to cut down approval delays.
Benefits of Reducing Accounts Payable Cycle Time
- Improved cash flow forecasting.
- Supplier loyalty and early payment discounts.
- Lower operational costs due to reduced manual work.
- Stronger financial reporting and compliance.
See how our AI-powered Financial Automation can transform your back-office operations.
FAQs on Accounts Payable Cycle Time
Q1. What is a good accounts payable cycle time?
A good AP cycle time is typically under 15 days when automation is applied.
Q2. How does automation impact AP cycle time?
Automation can reduce manual approval bottlenecks, cutting cycle time by up to 70%.
Q3. Can faster AP cycle times save money?
Yes. Faster processing allows businesses to capture early payment discounts and avoid late fees.
