Processing accounts payable invoices can be expensive. Fortunately, your company can save money with an accounts payable automation solution. The most recent AP processing survey conducted by the American Productivity and Quality Center (APCQ) in particular, found that the average AP process labor cost per invoice is $7.75. APCQ also reported that labor costs per invoice are 2.5 times higher at bottom performers than top performers, i.e. $12.44 versus $4.98, respectively. Similarly, the Institute of Financial Operations reported processing costs ranging from less than $2 to more than $25 per invoice.
Do You Know How Much it Costs to Process Your Invoices?
Many organizations often don’t know how much it costs them to process each individual invoice, but ‘cost per invoice’ is an important metric to understand – and it isn’t difficult to calculate. Generally, if you have a dedicated Accounts Payable department, simply divide the cost of running the department by the number of invoices processed. For example, if it costs $10,000 to run your AP department each week and they process 1,000 invoices – each invoice costs your organization $10. (There are many ways to calculate your company’s cost per invoice. This article does a great job of covering some of the most popular.)
What is the Savings?
The hunt for lower AP costs has led many businesses to Accounts Payable automation. It’s a great way to improve performance, streamline operations and reduce costs. How much cost savings can companies attain? Switching to an automated invoice process can generally reduce the cost per invoice to less than $2.00.
What Does it Take to Automate AP?
To achieve the greatest value from outsourcing AP, the entire solution should require minimal implementation to keep internal costs, set-up and training at a minimum. Think configurable, not customizable.
In addition with automation, it’s important that the organization keep an accounting team for invoice decisions that can require an accountant’s review. For instance, automation can happen to the vast majority of invoices. Meaning your staff won’t need to review items that don’t need human expertise.
An accounts payable solution offers many benefits to businesses including:
- Reduction in labor costs – companies report up to an 80% reduction in labor and its associated costs
- Lower per invoice costs – well under $2 per invoice
- Fast, seamless implementation into your existing enterprise systems
- Improved accuracy – businesses have reported paying up to $50-55 to handle each invoice error. A strong solutions partner uses sophisticated error identification and correction systems to reduce errors and costs.
- Complete audit trails and instant (real-time) record and reporting systems
- Routing of invoice deviations via smartphones or web browsers
Above all an automated, accounts payable solution can be a tremendous boost to productivity, accuracy and your company’s bottom line. It’s critical to choose a partner with the expertise to craft the solution that works best for your business. And together with understanding your true cost per invoice is an important step towards improving your company’s efficiency.
Do you know how much AP processing costs your business each month?