Average Cost to Process an Invoice: Comprehensive Guide

Most enterprises know their general financial health, including revenue, expenses, and cash flow. But, do you know the average cost to process an invoice within your business? While this might seem like a small, specific metric, it’s an important key performance indicator that reflects how efficiently your sales and accounting teams operate.

Today’s economic climate demands precision, and every line item counts. If you’re not measuring your invoice processing costs, you’re likely overspending on tasks that could be automated or streamlined. Knowing the cost of processing an invoice could be the insight your company needs to stay competitive and operationally lean.

Let’s discuss how to calculate the average cost to process an invoice and why knowing the cost is both a back-office concern and a strategic opportunity.

Why You Should Track the Average Cost to Process an Invoice

There’s a growing consensus that tracking your AP cost per invoice is no longer optional, but a necessity. Organizations that understand their average cost to process an invoice are better positioned to identify inefficiencies, lower operational expenses, and enhance cash flow planning.

Invoice processing costs aren’t limited to paper, postage, or printing. They include labor, error resolution, exception handling, storage, data entry, approvals, and delays. Manually handling these steps increases the cost of processing an invoice and exposes you to late payment fees and missed early payment discounts.

Benchmarking this metric allows you to compare your current process with industry leaders. For example, according to our own industry data, the average cost to process an invoice varies dramatically between manual and automated processes. Businesses processing invoices manually average around $15.96 per invoice. In contrast, those with robust automation can bring that figure down to $2.94 or lower.

Key Components of Invoice Processing Costs

Invoice processing costs encompass both direct allocations and indirect overhead that aggregate into your bottom-line expense. Understanding how to calculate cost per invoice is key to defining these elements, revealing where inefficiencies hide and how automation can deliver strategic savings.

Direct expenses include labor for data entry, verification, approval, and vendor communications, infrastructure investments such as software licensing and hardware maintenance, and transaction fees charged by banks or third-party platforms.

Indirect overhead spans error resolution, exception handling, late-payment penalties, missed early-payment discounts, and the opportunity cost of tying up finance resources in low-value tasks.

These categories form the foundation for accurate cost benchmarking and lead us into examining each component’s impact on total processing expense.

How Labor Costs Impact Invoice Processing Expenses

Labor costs represent the largest share of invoice processing expense by requiring human resources for data entry, vendor correspondence, approval routing, and audit workflows. High invoice volumes multiply data-entry hours, while complex approval hierarchies increase back-and-forth interactions.

• Data Entry and Validation: Staff manually transcribe and validate invoice fields, driving 60–70% of labor expense.
• Approval Routing: Routing invoices through multiple approvers adds cycle time and administrative touchpoints.
• Exception Handling: Resolving discrepancies or missing data consumes additional hours per exception.

Labor-driven delays also elevate indirect costs, which we explore next.

The Hidden and Indirect Costs in Manual Invoice Processing

Beyond visible line-item expenses, manual processing incurs indirect overhead that quietly erodes margins. Late-payment fees, missed early-payment discounts, vendor relationship strain, and audit rework all inflate the cost to process a single invoice.

• Exception Resolution: Each error demands follow-up calls, emails, and re-submissions, lengthening cycle time.
• Late-Payment Penalties: Prolonged approvals can trigger fees or damage supplier terms.
• Opportunity Cost: Finance teams tied to routine tasks cannot focus on strategic initiatives.

Understanding these hidden burdens is crucial before evaluating infrastructure and transaction fees.

How Infrastructure and Transaction Fees Contribute to Total Costs

Infrastructure spending covers on-premises or cloud-based AP systems, OCR engines, database hosting and IT support. Licensing, maintenance, storage and security controls all factor into per-invoice overhead.

Transaction fees charged by banks, card networks or third-party platforms add incremental costs—typically $0.20 to $1.50 per invoice. When combined with infrastructure amortization, these fees can raise the cost floor for every document processed.

Recognizing infrastructure and transaction costs completes the cost-component profile and sets the stage for comparing manual workflows to automated AP solutions.

Calculating the Average Cost to Process an Invoice

Step One: Establishing Your Invoice Benchmark

Before diving into how to calculate cost per invoice, it’s crucial to set a benchmark. Your business can set a realistic midpoint using the manual average of $15.96 and the automation benchmark of $2.94. A good starting figure might be $9.45 per invoice. This provides a baseline cost to evaluate your current state against, with room to identify possible improvements through optimization.

Setting this benchmark offers a realistic target. It reflects both best-in-class performance and what’s achievable for organizations beginning their AP automation journey. Over time, your goal is to inch closer to the lower end of the spectrum, reducing your AP cost while improving invoice accuracy and speed.

Step Two: Estimating Your Invoice Processing Costs

Once you’ve established a benchmark—such as the industry average of $9.45 per invoice—the next step is estimating your internal cost. Is your current figure higher, lower, or close to that number? Don’t worry about precision just yet. This step is about building awareness.

Start by evaluating your current invoice workflows. Are most invoices PO-based or non-PO? Are approval steps manual or digital? How many invoices require exception handling or rework? These variables all influence your average cost to process an invoice.

Remember, estimating your current cost isn’t about passing or failing—it’s about understanding your baseline. Whether your figure is above or below the benchmark, it simply reflects where your AP department is today. The real value lies in uncovering the actual cost later in the process—and identifying how much room there is to optimize.

Step Three: Calculating the Actual Cost of Processing an Invoice

To calculate your invoice processing costs accurately, you’ll need to gather data from across your organization. This isn’t a task to rush—give yourself time to dig into the details.

Start by completing the checklist below. You may need to collaborate with colleagues from other departments—especially those involved in finance, procurement, or operations. These conversations will not only help you estimate more precisely, but they’ll also surface key players who may be vital when it’s time to form a selection committee for enterprise solutions.

Start by compiling information such as: