When figuring accounts payable overhead costs, you’ll have to consider the cost of processing each invoice. What does it cost to process your invoices, and how can you reduce that cost with AP Automation?
Average invoice processing cost
According to a survey by the , businesses without automated invoice processing spend over ten dollars per invoice. Companies that use automation can cut that cost to as little as two dollars. That’s an eighty percent savings. You can see why doing a cost analysis of your invoice processing is essential to evaluating the health of your business.
Knowing the cost per invoice is also valuable information to have when deciding on AP automation software. .
Why manual processing is so costly
Five basic factors drive the cost of manual invoice processing:
- Manual, paper-based tasks in the AP process
- Manually matched invoices and accounting software data
- Manually reconciled invoice and PO data
- Paper-based approvals
- Outdated, inefficient AP software
To figure the cost per invoice for your organization, you need a detailed analysis that takes into account the following factors:
Data entry: Manual data entry can take 5 minutes or more per invoice. Depending on salaries, that could amount to three dollars or more per invoice.
Processing and approvals: The time necessary to gather the required approval signatures could represent another three dollars. If you need authorization from CEOs or managers who are not always available, it could be even higher.
Materials: The cost of paper, ink, envelopes, and stamps could be seventy-five cents per invoice.
Storage: Storing invoices locally will take up valuable office space, which will impact your rent. On the other hand, offsite storage space could cost up to two hundred dollars per month for all your invoices.
Errors and late payments: It’s hard to put a price on errors. Manually processing invoices is more prone to error penalties, late payments, and fraud. Depending on your vendors’ policies, these costs can add up quickly.
How to lower the cost of invoice processing
Automating your invoice processing is the easiest way to reduce the per invoice cost. Let’s look at the cost of those five factors again with automation.
Data entry: With optical character recognition, you can dramatically reduce your invoice data entry time and completely revolutionize the way you process invoices. Cost can be less than one dollar per invoice.
Processing and approvals: Approval workflows and shared web portals will save time, money, and frustration in acquiring approvals and avoiding late fees. This step could be as little as twenty cents or less per invoice.
Materials: Going digital will eliminate the need for paper, ink, and stamps—cost per invoice: zero.
Storage: With cloud-based AP automation, data storage is generally included and can cost less than pennies per invoice.
Errors and late payments: Again, this is hard to predict, but AP automation is proven to reduce errors, late payments, and fraud.
Additional benefits of AP Automation
Implementing might seem expensive. But when you factor in the following hidden cost benefits of AP automation, it makes a lot of sense. In addition to greatly reduced per-invoice costs, you’ll also:
- Prevent Fraud
- Maintain Internal Controls
- Increase productivity
- Keep your team lean
If you would like to know more about how AP Automation can benefit your business, our experts at Fedesic.
By Fedesic by Enliven Software,
