The average cost to process an invoice is never just about whatever the bill says, particularly for companies that are still largely reliant on paper-based accounts payable processes.
After all, paper invoice processing costs include a range of direct costs, such as labor, as well as indirect costs, such as storage. There are also many hidden costs that many firms might not consider, such as fines levied due to errors uncovered in the audit process. It makes it so that the average cost to process an invoice generally hovers north of $10 a piece and can be as much $30 to $40 an invoice when conducted manually.
Today, we’re going to look at why the average cost to process an invoice can be so expensive, how AP automation can dramatically slash these costs, and how Stampli is particularly useful in this regard.
What Drives the Average Cost to Process an Invoice
In mid-2020, PYMNTS.com noted that, on average, it cost $11.57 and took 8.6 days to process an invoice.
For companies curious how they compare, they can attempt to divide the total number of invoices processed by key metrics like the operating cost for their accounts payable department. This will help them get an idea of overall averages across processing and payment types. That said, there is a hidden cost to each invoice.
Let’s look at three factors that can drive up the average cost to process an invoice in largely paper-based processes.
1. Outdated, Incomplete, or Non-Existent AP Technology
While a wide range of cloud-based AP automation systems exist in the market today, it’s safe to say that many companies haven’t fully taken advantage of current capabilities.
Some companies might be sticking with the expensive proprietary system that they had built in-house, say 10 to 15 years ago. Implementations of this sort used to be nightmarish and companies have perhaps held off on updating for fear of going through it all over again or what the cost might be to upgrade.
Other companies have perhaps updated part of their AP technology. A 2021 whitepaper and survey by Stampli and Treasury Webinars, “The How, the Why & the ROI of AP Automation” found that companies were most likely to be leveraging payment technology at 68%, following by invoice management at 66%, and approval workflows at 55%.
But some companies haven’t gotten this far, instead just having their staff process paper bills by hand, as they come in. This can lead to all sorts of problems.
2. The Human Cost
There is an undoubted human cost when it comes to trying to figure the average cost to process an invoice, particularly in companies that primarily use paper-based processes.
Paper invoices must be gathered from the mail, opened, entered, double-checked for accuracy, and matched with purchase orders. Only then can they be sent off for approvals, which can take weeks. Your AP employees may also need to hand-deliver approval requests, reach out to multiple departments, and spend time chasing down requested information.
Whenever humans are involved in a process, there are also bound to be errors. Manual data entry, for example, isn’t foolproof. Mistakes that a computer will catch, such as a changed vendor bank account, may go unnoticed by a human who processes dozens of invoices a day and is typing them in as fast as they can.
3. Increased Risk of Compliance Violations
In Stampli and Treasury Webinars’ survey on AP automation ROI, it found that a meager 12% of companies were leveraging AP technology for governance and compliance.
This was true despite the fact that manual invoice processes are difficult to track and make enforcing accounts payable internal controls more challenging. For example, you may be required to save documents for a set period of time — when invoices are stored in as paper files, there are no safeguards protecting them from being destroyed before their pre-set deadlines.
Compliance is also highly valued in accounts payable work. In another 2021 survey by Stampli and Treasury Webinars, “Drivers of AP Success: Metrics, Collaboration, Influence” the top success metric, identified by 40% of respondents, was compliance with AP policies. Having ways to better encourage this, such as AP automation, is useful.
How AP Automation Slashes the Average Cost to Process an Invoice
As we noted earlier, invoices can cost $11.57 apiece to process and takes 8.6 days, representing an average of companies that both have and haven’t implemented a large amount of automation for their AP operations. Not surprisingly, in extreme cases where companies are still processing an intense number of invoices by hand, those averages can be multiplied anywhere from two to four times.
The good news: PYMNTS.com has noted that AP automation can take these averages down to $2.18 and 2.9 days, respectively, representing cost savings of 81% and time savings of 66%. Needless to say, for companies that process a sufficient volume of invoices, AP automation platforms can more or less pay for themselves. For anyone curious why this is, let’s look at how AP automation drives down the average cost to process an invoice.
Why AP Automation Lowers the Average Cost to Process an Invoice
Cloud-based AP automation solutions help to reduce the time previously wasted on processing paper invoices, ensure on-time payments, and improve capital management. AP automation also reduces the costs of processing paper invoices by eliminating paper and postage fees, reducing or eliminating storage fees, and streamlining the audit process.
Using AP automation, you can also capture and analyze critical data to better assess your entire company’s performance. AP automation can even track accounts payable metrics to provide a truer projection of how efficient your department is as a whole. This means that aside from the simple savings that occurs with each invoice processing, companies can set themselves up for more significant workflow improvements and savings over time related to the average cost to process an invoice.
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