The High Cost of Manual AP Invoice Processing: Why Automation is a Game-Changer (Part 4 of 12)

Introduction:

In our previous post, we explored the various methods companies use to manage their Accounts Payable (AP) processes without automation. From paper-based processes to spreadsheets and email, these manual approaches often fall short in terms of efficiency, accuracy, and control. In this fourth installment of our invoice automation series, we’ll dive into the financial impact of manual AP invoice processing and reveal why automation is a game-changer for companies looking to optimize their AP operations.

The Price Tag of Manual Processing: According to a study by the Institute of Finance and Management (IOFM), the average cost to process a single invoice manually ranges from $12 to $30. This cost includes labor, materials, and other overhead expenses, with the higher end of the range typically applying to companies with more complex AP processes or those in industries with strict compliance requirements.

The American Productivity & Quality Center (APQC) found similar results in their survey, with the median cost to process a single invoice manually being $12.44. The top 25% of companies had a processing cost of $4.98 per invoice or less, while the bottom 25% had a processing cost of $16.67 per invoice or more.

Hidden Costs and Indirect Impacts: In addition to the direct costs, manual AP invoice processing can also lead to indirect costs that further burden companies. Late payment fees and lost early payment discounts can eat into a company’s bottom line, while increased risk of fraud and errors can lead to financial losses and reputational damage.

Moreover, manual processes can reduce productivity and efficiency, as AP staff spend valuable time on tedious, repetitive tasks instead of focusing on more strategic initiatives. Strained supplier relationships can also result from delays in payment processing and lack of transparency.

The Multiplier Effect: It’s crucial to recognize that these costs can add up quickly, especially for companies processing a high volume of invoices. For example, a company processing 10,000 invoices per month at an average cost of $15 per invoice would spend a staggering $150,000 per month or $1.8 million per year on manual AP invoice processing alone.

Automation: The Game-Changer: The good news is that implementing AP automation solutions can significantly reduce the cost of processing invoices. Automated AP processes can lower the cost per invoice to $2-$3 or less, resulting in substantial savings over time. By streamlining workflows, eliminating manual data entry, and improving accuracy, automation can also help reduce indirect costs associated with manual processing.

Furthermore, AP automation provides enhanced visibility and control over the entire invoice lifecycle, enabling companies to make informed decisions, optimize cash flow, and strengthen supplier relationships. The time and resources saved through automation can be redirected towards more value-added activities, driving overall business growth and success.

Conclusion: The high cost of manual AP invoice processing is a burden that companies can no longer afford to ignore. With automation as a game-changer, businesses can unlock significant cost savings, improve efficiency, and gain a competitive edge in today’s fast-paced business landscape.

In our next post, we’ll explore the key features and benefits of AP automation solutions and how they can transform your invoice processing workflow. Stay tuned as we continue our journey towards optimizing your AP operations and driving business success!

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