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 invoicing 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 apiece and can be as much $30 to $40 an invoice in extreme scenarios.
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, to 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 Outdated, Incomplete, or Non-Existent AP Technology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.
Other Benefits of Switching to AP Automation
Overhauling the AP process sounds overwhelming, especially if all it will save you is a few minutes of time and a few bucks per invoice. However, there are far more benefits to AP automation. Consider the following:
- Significant labor savings and productivity: You can save on labor costs for AP employees and other staff like approvers, managers, and mail deliverers. And when employees spend less time on menial tasks like data entry, they have more time to focus on strategic goals, like improving spotting opportunities to save money.
- Fewer late fees and more early pay discounts: A streamlined approvals process means your company will be better able to take care of early-pay discounts and build a stronger relationship with your vendors — which could result in additional savings down the line.
- Improved accuracy: Manual processes are more likely to introduce mistakes. With AP automation, invoices can be imported automatically, which helps prevent costly mistakes like double payments.
- Reduced fraud risk: Many AP automation software solutions make it easier to spot fraud. Stampli, for example, centralizes conversations on a digital invoice, so everyone stays in the loop and is easily accessible for audit purposes.
The Bottom Line
Companies using AI-based automated invoice management software see their invoices several times faster. This collaboration-based solution allows AP to retain full visibility into the approvals process at every stage, revealing bottlenecks and other important data that managers need to predict cash flow.
As you can imagine, when invoices are approved significantly faster, that represents a huge time savings on the part of many employees. The less time they spend approving invoices, the more time they spend on their actual jobs with the help of automated accounts payable technology.
How Stampli Can Help Lower Your Average Cost to Process an Invoice
For any company ready to start saving time and money every time they process an invoice, Stampli excels in the general areas where many AP automation providers thrive and then brings some of its own specialties to the table.
All-In-One Invoice Processing and Payment
Processing costs can increase with some AP automation systems because they’ll do everything except payment. This can mean having to deal with extra fees, with fees for credit cards and wire transfers sometimes especially high (but certainly worth it in the right situations.)
And sometimes the costs are high no matter which method a company chooses. Another 2021 survey report by Stampli and Treasury Webinars, “How & Why Companies Choose Payment Types” found that over 25% of companies were paying an average cost to process an invoice of at least $15 regardless of if they paid with check, ACH, or credit card.
Stampli helps address this with Stampli Direct Pay which allows for the scheduling of ACH payments and simple reconciliations directly within our system. We can even help the companies we work with print their own paper checks.
Billy the Bot: Friend of Frugality
Stampli also leverages artificial intelligence and machine learning, via its own creation, Billy the Bot which can eliminate traditional elements of the average cost to process an invoice like data entry.
Instead of having a human employee labor over a stack of invoices (and they never stop coming in, really), Billy can use optical character recognition and AI to intuitively scan in invoices. Billy will even remember invoicing tendencies by different vendors, making the processing go that much quicker in the future.
Easy and Affordable Cloud-Based Implementation
One other thing worth noting: Sometimes, the average cost to process an invoice is high because a company has to factor in how much it cost to build a custom, on-premises system.
While Stampli certainly offers its users a high degree of customization within its platform, our cloud-based AP automation system ensures a painless implementation and affordable costs going forward. We make AP technology work for companies even if it hasn’t worked for them before.
Save as much as 80% on your average cost to process an invoice. See the Stampli difference today.
The post How to Bring Down the Average Cost to Process an Invoice with AP Automation appeared first on Stampli.
By: Tyler Hakes
Title: How to Bring Down the Average Cost to Process an Invoice with AP Automation
Sourced From: www.stampli.com/blog/invoice-processing/cost-of-processing-invoice/
Published Date: Thu, 07 Oct 2021 16:00:00 +0000