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How to Determine Your Cost to Process a Single Invoice

Does your organization know how much it costs to process a single invoice? At first glance, this figure might seem too granular and specific to be of any value. After all, your organization probably understands the difference between its revenue and expenditures. But upon closer inspection, determining your cost to process a single invoice can provide your organization with a concrete figure to compare its invoice processing capabilities against. If you can decrease this figure, you can increase your bottom line — which means better cash flow management and increased liquidity to grow your business.

Ready to determine your cost to process a single invoice? Follow these steps:

  1. Set your cost per invoice benchmark
  2. Estimate your average cost per invoice
  3. Calculate your average cost to process a single invoice
  4. Compare your total against your estimate and benchmark
  5. Consider solutions for decreasing your average cost per invoice

1. Set Your Cost Per Invoice Benchmark

In Top 5 Reasons to Automate Invoice Processing, we discuss the significant cost differential for companies that process invoices manually and those that automate invoice processing. Companies with no automation spent, on average, $15.96 per invoice whereas companies with automation only spent $2.94 per invoice.

When setting your cost per invoice benchmark, you want to set a realistic goal that falls between these two averages. If your organization hasn’t automated Accounts Payable, $2.94 can be an unrealistic benchmark. However, you don’t want your cost per invoice to exceed $15.96 as this indicates that your process is inherently flawed and may require you to rework your process from the ground up.

For our example, let’s set your cost per invoice benchmark squarely in the middle of these two values: $9.45. Of course, you can adjust your benchmark as needed to better suit your business. The goal here is to set a concrete goal that we can compare against your current cost per invoice.

2. Estimate Your Average Cost Per Invoice

Now that you’ve established your benchmark, it’s time to estimate what your average cost per invoice really is. Is it greater than, less than, or equal to $9.45? In the next section, we’ll give you all of the information you need to calculate your actual cost per invoice, but before we get to that step, take a minute to consider where you think you currently fall.

If your estimate is higher than the benchmark we set in the last section, that’s okay! If it’s lower, that’s also okay! Although you are free to adjust your benchmark, keep in mind that we set it at $9.45 because this falls in the middle of the range we’ve observed while servicing our customers. Estimating your average cost per invoice gives you an opportunity to think about where your AP department currently stands. It also makes the discovery of your actual cost per invoice that much more enlightening.

3. Calculate Your Average to Process a Single Invoice

Are you ready to see where your organization stands in relation to your benchmark and estimate? Take some time to record your answers to the checklist below. You may need to reach out to other leaders in your organization for information related to these questions. Keep in mind the individuals you speak with as they may play an important role in forming your committee for the enterprise software selection process. Enterprise software, such as Accounts Payable Automation, will help you bring down your actual cost per invoice and get it more aligned with the top benchmark of $2.94 per invoice.

Here’s what you’ll need:

  • # of supplier invoices you process per year
  • Avg. length of each invoice?
  • % of PO-based invoices
  • % of invoices that require exception handling
  • % of invoices received via mail and email?
  • # of POs and check pages filed per year
  • # of invoice processors in your AP department
  • Avg. annual salary, avg. fully burdened salary, and avg. fully burdened hourly rate for AP department
  • # of early payment discounts that are available to you each year
  • # of early payment discounts that you miss each year
  • Total cost of late payment fees incurred per year
  • Total cost (if applicable) of sending invoices from remote offices or plants to HQ for processing
  • Total cost of collecting, printing, and storing POs, receiving documents, payment documents, and other transactional information, including the cost of outsourcing document processing and data entry
  • Total time spent on recurring tasks, including invoice prep, document routing, mathematical conversions, duplicate payment resolution, and reporting (per month/year)
  • Total time spent on occasional administrative tasks, including audit preparation and file destruction (per year)
  • Total time spent by non-AP employees performing tasks such as sending procurement requests throughout our internal approval routes or entering receiving data into your ERP (per month/year)

Once you have your totals, submit them to info@intellichief.com. One of our experts will calculate your average cost per invoice using our AP Automation ROI Calculator. If you would like more information about the ROI Calculator before submitting your information, please send a request to info@intellichief.com. In the meantime, bookmark this page so you can complete Steps 4 and 5.

4. Compare Your Total Against Your Estimate and Benchmark

Once you know your cost to process a single invoice, it’s time to compare it against your estimate and your benchmark. Based on your findings, following Step 5 could be either critical or unnecessary.

If you need to lower your cost to process a single invoice, considering a solution that can help your organization do just that is the next natural step. On the other hand, if your cost is already lower than the top benchmark and your estimate, your organization might want to seek a different avenue for cost savings.

Here’s what your findings suggest about your current processes:

  • If your cost is higher than the manual processing benchmark (>$15.96), it means your organization is wasting thousands, potentially millions, on time-consuming and tedious manual invoice processing. It’s time to overhaul your AP process.
  • If your cost is higher than the median benchmark (>$9.45), it means your organization is outperforming laggards but failing to streamline and optimize its invoicing processes to compete with the top-performing half of all companies.
  • If your cost is less than the median benchmark (<$9.45), it means your manual invoice processing methodology has been refined but lacks the speed and accuracy of an automated invoice management system. In other words, your organization is a top performer amongst technology-deficient businesses. Conversely, it could indicate that your organization has an invoice automation solution that isn’t performing at the level it should be.
  • If your cost is less than the automation benchmark (<$2.94), it means your organization has likely deployed some form of invoice automation to reduce its invoice processing costs. You don’t need to do anything — unless you want to expand your solution to other departments or find a solution that offers more features.

5. Consider Solutions for Decreasing Your Average Cost Per Invoice

With your cost to process a single invoice verified, it’s now time to consider your next steps and start asking questions, including:

  • Is my organization satisfied with the cost to process a single invoice?
  • How can I reduce the cost of invoice processing?
  • Which vendors should I consider to help my organization achieve its goal?
  • What is the initial cost of implementing an AP Automation solution for invoices?
  • Do we need separate strategies for tackling PO-based and non-PO-based invoices?
  • What other cost-saving strategies should my organization consider to further reduce the cost to process a single invoice?

For many businesses, AP Automation is the ideal solution for reducing invoice processing costs. With a robust, scalable solution, organizations can reduce invoice processing times by 70 percent or more while improving accuracy, eliminating duplicate payments, and seizing more early payment discounts. Together, these functionalities yield significant time and cost savings that are impossible to replicate without an enterprise software solution like IntelliChief.

Are You Ready to Reduce Your Cost to Process a Single Invoice?

Reducing your invoice processing costs is one of the best ways to enhance your bottom line. The majority of companies have not invested in AP Automation because they haven’t identified the need. Working under the assumption that “if it ain’t broke don’t fix it,” these companies continue to squander profits on processes that are ineffective and costly. Now that you understand how much each invoice is costing your business, it’s time to do something about it!

To learn more about our solutions for automating invoice processing, contact IntelliChief today. Our industry-leading AP Automation solution integrates with your core technologies to support a seamless automated experience from start to finish.

 

 

Top 5 Reasons to Automate Invoice Processing

Businesses around the globe process billions of invoices annually. As the process of purchasing materials and goods is refined and streamlined, this volume is only increasing. In fact, recent studies suggest that the volume of invoices received is likely to quadruple over the next decade. For this reason, many businesses are eager to automate invoice processing to better manage their cash flow.

The benefits of automated invoice processing are well documented, but many companies are still hesitant to take the leap. Many of these companies have heard the familiar pitches, including:

  • Invoice automation increases efficiency
  • Automating Accounts Payable improves accuracy
  • AP Automation is a perfect entry point for digital transformation

But how can you be 100 percent certain that automating invoice processing is, in fact, the ideal solution for your business? In this article, we break down the top five reasons why companies are utilizing invoice automation to gain a competitive (and operational) advantage.

1. Automating Invoice Processing Saves Time

Do you still process invoices manually? If so, your process probably looks something like this:

  1. The invoice is generated by the supplier
  2. The supplier sends the invoice to the purchaser
  3. The invoice is printed and walked to an approver
  4. The data on the invoice is manually entered into the purchaser’s ERP system
  5. The invoice data is sent to the approver for review
  6. The invoice is approved
  7. The purchaser writers a check
  8. The check is mailed to the supplier

Of course, this process doesn’t necessarily end here. If there are any discrepancies or issues with the invoice, the purchaser and the supplier must work together to resolve them for approval.

Now, let’s compare the number of steps involved when this process has been automated. It looks like this:

  1. The invoice is submitted digitally via an invoicing platform (i.e., IntelliChief) to the purchaser
  2. The invoicing platform captures data from the invoice automatically
  3. The invoicing platform automatically processes the invoice through the correct approval routing procedures
  4. Once approved, payment is sent to the supplier

With invoice automation, the number of steps required to approve an invoice is cut in half. Better yet, each of these steps is occurring in real-time, which means your business doesn’t need to wait for an approver to interact with an invoice. Invoices are automatically captured and processed as they arrive without any human intervention, resulting in an 80 percent reduction in the amount of time it takes to process an invoice. In our research, we have found that it takes companies an average of 16.6 days to process an invoice manually as opposed to only 3.6 days with invoice automation.

Needless to say, time saved is money earned — bringing us to the second reason why businesses choose to automate invoice processing…

2. The Cost Savings Are Undeniable

When you can reduce the amount of time it takes to process invoices, you can get a more accurate look at your cash flow and make better decisions, but that’s only the beginning of the cost-saving benefits of invoice automation. You also save by:

  • Decreasing the amount of labor required to satisfy your AP process
  • Reducing paper-based overhead, including printing, mailing, and physical storage
  • Eliminating late and duplicate payments

Over time, these savings add up. When your cost per invoice is up to 80 percent less, you can reinvest those dollars saved to help your business grow and evolve. We’ve done our own research by leveraging our database of hundreds of customers. We’ve found that on average, businesses that automate invoice processing pay an average of $2.94 per invoice. This cost spikes to $15.96 per invoice at companies with no automation.

3. Gain Superior Visibility and Cash Flow Management

With automated invoice processing, your business will have a more accurate picture of where it stands from a cash flow management perspective. Not only will you have a better idea of your total available cash flow but also how it is affected throughout the year. In other words, invoice automation makes it easier to plan your next move — growing your business has never been easier.

Here are some examples of what your business can accomplish with greater control over its cash flow:

  • Invest in innovation
  • Hire and train new workers for more fulfilling roles
  • Expand product and service offerings or double down on your existing offerings by improving them
  • Reinvest in other departments that can benefit from automation

It’s no secret that implementing automation makes it easier for businesses to scale as their needs evolve, but it also helps kickstart growth by providing some greatly needed stimulus. Plus, with better cash flow management, you can focus on further refining processes to become more efficient.

4. Redefine Efficiency and Eliminate Human Error

According to Billentis, 20-30 percent of invoices “have to be treated as exceptions in one form or another.” This is where the top-tier invoice automation solutions separate themselves from the pack.  An important question to ask when considering invoice automation is this:

  • Can the solution automate exceptions? And to what extent?

Most automated invoice processing systems can automate simple, PO-based invoices. When discrepancies occur, these systems break down and require manual approval. Unfortunately, this is also the scenario most likely to result in human error. What if your solution could automate the bulk of your discrepancies? IntelliChief can.

IntelliChief utilizes a variety of features based on approval logic to get the job done when other solutions can’t. Mismatched item numbers? No problem. Unconverted currencies? No problem. Missing vendor ID #s? No problem. The list goes on.

This helps you improve invoice approval accuracy while also benefiting from additional process controls, reporting, accountability checks, and more. What happens when the discrepancy can’t be automated? Invoices can be recalled on demand and instantly connected to other related documents, allowing you to analyze what went wrong and why. If the solution is repeatable, IntelliChief will take the proper action next time having learned it from your manual approver.

5. Reduce Stress With Automated Compliance

Your invoices are an important form of documentation when it comes to financial and tax compliance. Your auditor needs to know what you purchased, and for how much, to ensure that your business doesn’t have anything to hide. Unfortunately, paper-based invoices are easy to lose or damage, which can cause friction with your compliance requirements.

With invoice processing automation, you can essentially automate compliance by providing auditors with all of the information they need through a digital portal. With your system constantly updating itself in real-time, you don’t need to explain why a certain document is missing or features outdated information — everything is accounted for at all times.

The World Bank notes that invoice automation can help you fortify your tax compliance and legal security needs while reducing related costs by nearly 40 percent. Are you currently preparing for an upcoming audit? Rather than investing sweat equity and work hours into preparation each time an audit is required, you can automate the entire process from start to finish with virtually no maintenance — all thanks to automated invoice processing.

Are You Ready to Automate Invoice Processing?

Now that you understand how invoice automation can help you reduce invoice processing costs, decrease invoice cycle times, obtain more vendor discounts, eliminate paper/storage costs, and achieve superior visibility into your process, it’s time to speak with an expert about your specific goals and requirements. Before you start to shop around, it’s important to form an enterprise software selection committee and understand the integration requirements of your core technologies.

Once you have this information, contact IntelliChief to speak with an expert about your project. We’re happy to point you in the right direction to ensure that your automated invoice processing project helps your business gain a competitive advantage.

Accounts Payable Automation 4-Way Matching

Accounts Payable Automation 4-Way Matching

Accounts Payable Automation is a powerful tool for any organization that finds itself processing a large volume of transactional information on a regular basis. Unfortunately, many organizations fail to identify the nuances (and potential nuances) of their AP process. Matching a PO to an invoice and receipt is a relatively simple process to automate, but what happens when additional approvals are necessary to fully vet a transaction? What happens when a 2-way matching process requires an additional step? And what happens when a fourth match is required? Here’s everything you need to know about Accounts Payable Automation 4-Way Matching:

Large Enterprises Require Accounts Payable Automation 4-Way Matching

Although Accounts Payable Automation 4-way matching is rarely top of mind when an organization decides to seek out an Enterprise Content Management (ECM) solution for AP Automation, it can be achieved with the right vendor. For example, if your organization is headquartered in the United States but has operations spanning North America and Europe, the major drivers for such a project might include:

  • Scaling back paper-based processes (and eliminating paper)
  • Reducing time and cost associated with manual ERP data keying and workflow management
  • Streamlining back-office processes across disparate locations and systems
  • Eliminating late and duplicate payments
  • Obtaining more early pay discounts
  • Improving the work environment

All of these benefits can be realized with the right ECM solution for your organization; however, your shortlist of solutions should be just that — short. Reducing the amount of time required to complete the matching process is key to faster and more efficient workflows, but if your solution only automates simple 2-way matching or more advanced 3-way matches, certain transactions will inevitably fall through the cracks. Few solutions can capably perform 4-way matches, but those that can tend to support higher rates of “straight-through processing” and greatly reduce the amount of manual, error-prone work performed by employees.

How Does Accounts Payable 4-Way Matching Work?

The precursor to a reliable Accounts Payable Automation 4-way matching process is the Enterprise Resource Planning (ERP) system(s) at the heart of your organization and the ECM solution that will help you unlock new features using your existing software infrastructure. Most organizations will review vendors and perform due diligence until they find a solution that can be expanded throughout their organization without bringing additional vendors into the fold and integrates with their current ERP(s).

Before a definitive selection can be made; however, your organization must develop a robust understanding of your existing business processes and the underlying workflows that drive these processes forward. This is best accomplished by partnering with a vendor that is willing to perform a comprehensive discovery and whiteboarding session to identify just how complex these processes truly are (and whether or not Accounts Payable Automation 4-way matching capabilities are necessary to help you reach your goals).

An example of a 4-way match is an invoice that must be matched to a purchased order (PO) and then to a receiver, before finally being matched against a quality inspection sheet. The additional flexibility of being able to emulate such a nuanced workflow with automation is extremely liberating for businesses that want to be able to fully automate their enterprise. And it shows as organizations that implement seemingly become leaner and more profitable overnight.

Additional Automation Benefits

Accounts Payable Automation 4-way matching is an advanced capability that helps companies close the gap on straight-through processing rates exceeding 90 percent or greater. By automating the entire AP process from document capture to workflow and approval, your organization can cultivate an environment where only the rare exception will require manual handling.

In this touchless environment where no ERP keying or other human interaction is needed,  ERP lookups for vouchering, validating, and supplementing key data between systems are executed using a rules-based business process automation workflow mapped to your specific practices, enabling lightning-fast reviews and approvals. This is achieved using cross-reference table algorithms that normalize data among systems and constantly match variables to maintain data integrity. AP processing staff can be reduced or reallocated, giving them the additional bandwidth needed to concentrate on strategic operations. Lastly, the ancillary benefit of AP Automation in related vendor fees, paper, and onsite and offsite storage costs — which can oftentimes be eliminated altogether savings tens of thousands or more.

To learn more about how Accounts Payable Automation 4-way matching can help your business gain a competitive advantage, contact us today.