What is the cost to process an invoice?

For any business, the cost of processing an invoice is a key indicator for assessing its accounts payable overhead. This post will examine the average invoice cost.

This will be broken down into the costs for each step in the AP process that affects the average cost of processing an invoice. We will also examine the specific ways that automation can lower the cost of processing an invoice.

What is the average cost of processing an invoice?

According to the American Productivity & Quality Center, companies that use minimal or no automation to process invoices spend more than $10 per invoice. Companies that have few to no manual steps in their AP processes spend $2 per invoice. This means that if your payments process is not automated, your AP overhead could be reduced by up to 80%. The cost of processing an invoice is a crucial metric.

Before you pitch new AP automation software, it is important to do a cost-per-invoice analysis. Find out more about building a business case to support AP automation.

Why are there high invoice processing costs?

It seems obvious that processing invoices have higher costs than manual processes. However, these five factors are the most costly in the AP process.

Manual and paper-based tasks are part of the AP process

Manually matching accounting software data and invoice data

Manually match PO and invoice data

Approvals on paper

Software for AP that is out of date or clunky

What AP Steps Impact the Invoice Processing Cost?

A detailed analysis is required to determine the cost per invoice of a business. Here are some factors you should consider, as well as estimates for each step.

Data Entry - $1 to $3: Manual information entry can take approximately 5 minutes per invoice. This can cost up to $3 per invoice depending on the pay rate for AP clerks.

Approvals and Processing- $1 to $3 Per Approval: Factoring takes the time to chase down managers and get their signatures. This can vary depending on the pay rate of each desk involved in the process. It can run between $2 and $3. The cost of the approval process can be dramatically increased if a CFO is involved.

Materials Prices - 15 Cents: This includes paper, ink, and envelopes. The cost of U.S. postal stamps is $0.55 for paper invoices.

Storage – $200 total (Starter Pack): Invoices that are stored in offsite storage facilities incur additional fees. Storing them locally can take up valuable space and increase the risk of losing them. Although these costs can vary widely, a basic plan for offsite storage starts at $200 per month. This covers all of your data. Paper storage is expensive. If you store invoices in high-rent locations like Los Angeles and New York it can be a significant cost burden.

Late Payments and Errors $0 – $$Hundreds per Invoice: Manually processing invoices is more susceptible to fraud, late payments, and error penalties. This will depend on the policies of your vendors, but it can quickly become very expensive.

How to Lower the Cost of Processing an invoice?

Automation is the best and easiest way to lower the cost of processing invoices. Let's take a look at each step and see how automation can reduce the cost of processing an invoice.

Data Entry – Less Than $1: With optical character recognition, your manual invoice data entry can be dramatically reduced. Integrating your accounting system can revolutionize how invoices are processed.

Approvals and Processing - Less Than 20 Cents Per Approval workflows, and simple to use web portals, will save AP clerks time and money by reducing the amount of manual work involved in managing the process.

Materials – $0: Go digital and get rid of the need to purchase physical materials

Storage With a cloud-based AP automation system, data storage is usually included and can be less expensive than pennies per bill.

Late Payments and Errors - Significant reduction: Again this is difficult to predict but AP automation has been proven to reduce fraud, late payments, and errors.

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Hidden Cost Benefits of AP Automation

It might seem unnecessary to invest in new solutions such as accounts payable automation software. When you consider the hidden costs of AP automation, however, it can seem like an unnecessary expense. The average cost of processing an invoice in your company could be measured in cents.

Prevent Fraud

Maintain Inter Controls

Productivity Boost

Keep Your Team Lean