Transactions Processed per FTE

Definition

The term transactions processed per full-time equivalent (FTE) refers to a calculation that allows a company to understand how efficiently the accounting department is processing routine transactions. The typical transactions processed for this metric include payments to suppliers or invoices issued.

Calculation

Transactions Processed per Person = Transactions Processed / Full Time Equivalents

Where:

  • Transactions processed is the total of a high-volume, repetitive type transaction completed in a given timeframe. For example, the analyst might be interested in the number of transactions processed in a single month. It's desirable to measure transactions that account for a significant number of accounting staff persons.
  • Full time equivalents (FTEs) is the total number of employees assigned to the transactions, adjusted for the time they spend working the transaction. For example, if 100 employees spend 25% of their productive time processing the transaction, then the number of FTEs would be 100 x 0.25, or 25 FTEs.

Explanation

Accounting and finance metrics allow a company's internal analysts to understand how well its accounting and finance departments are operating. This is usually assessed by examining metrics such as error rates, transactions processed, discounts taken, and turnaround times. Accounting and finance metrics allow the company's management team to identify areas where changes can be made that will improve their key operating metrics. One of the ways to learn how efficiently the accounting department is processing a certain transaction is by calculating transactions processed per FTE.

A company's accounting department is usually responsible for processing large numbers of transactions. This includes paying invoices, journal entries, and issuing invoices. Unless robotic process automation is deployed to complete these transactions, they will consume a significant amount of relatively expensive resources. One of the ways to understand how effective the accounting department is at processing these transactions is by calculating a metric such as transactions per FTE.

This metric can be applied across an entire department or calculated for a single individual. When calculating the latter metric, it's important to understand if the types of work vary across individuals and to ensure these are the only transactions worked by the individual. These types of metrics are frequently good candidates for benchmarking a department's performance against a peer set of companies. It's also good to calculate this metric over time, since there may be some seasonality to the total work volume.

Example

The Comptroller of Company ABC wanted to understand how effective her accounts receivable department was at sending invoices. She asked the company's benchmarking team to procure a global benchmark study, so she could understand the performance of the team. The benchmarking group determined top quarter performance was 483 or more transactions per month per FTE. The team also looked back at performance over the last six months to understand if there was a seasonal aspect to the rendering of invoices. The information below was found by the team.

 
January February March April May
Invoices Processed 8,488 8,585 8,460 8,645 7,980
Full Time Employees 15.0 14.0 15.0 16.0 16.0
Part Time Employees 5.0 6.0 6.0 6.0 6.0
Full Time Equivalents (FTE) 17.5 17.0 18.0 19.0 19.0
Invoices per FTE 485 505 470 455 420

Based on the above finding, the Comptroller launched an investigation to determine the recent degradation in performance. Earlier in the year, the team's transactions per FTE were in excess of top quartile performance, while the team recently slipped to second quartile.

Related Terms

transaction error ratepurchase discounts missed ratioaging buckets