In 2022, Ardent Partners estimated that it costs an Accounts Payable department an average of $10.18 to process a single invoice. If this sounds high, you’re right; this is high. Multiplied across even just a few hundred invoices per month, businesses are paying thousands of dollars per month just to make sure their suppliers get paid on time. This is part of what Green Cabbage calls the “hidden costs” of doing business, and the effects of reducing those costs can be massive.
First, some numbers. Included in the $10.18 estimate are people, penalty, and technology costs. According to that same report, it takes an estimated 10.9 days to process each invoice, largely because only about 30.2% of invoices are processed with little-to-no human intervention.
Taking those that aren’t processed smoothly, late fee and error risks become high once the invoice goes into a manual routing process. According to Tungsten Automation, a single person can process approximately 1,000 invoices per month, assuming there are no errors in the invoice and no additional tracking steps are taken. We know that this is not the case, meaning the number of invoices that can be processed by a single person is likely closer to 500-600 per month at best, given the significant effort needed to reconcile errors. And, with a person being tasked with processing 200-300 invoices with errors per month, the likelihood that they will catch every error is small.
The manual approach is simply not sustainable. Companies that do not leverage some sort of invoice automation process risk paying their suppliers thousands of dollars in errors and late fees, plus the huge labor costs of having employees focus solely on invoice processing rather than more strategic efforts.
In 2024, invoice automation is a must. The economics of manual processing make it impossible. But, invoice automation is not a one-size-fits-all solution. Some solutions will completely take over the process and eliminate the headache entirely. While those options are often prohibitively expensive for companies outside the Fortune 1000, they can certainly provide great services. Others will provide data extraction services, leveraging technology to extract data from each invoice to minimize the level of tedious data entry work required. These companies, though, often ignore the workflow component of invoice process management and generally gather only top-line data, which is not helpful if looking to identify errors.
Invari takes a different approach, pairing best-in-class line-item-level data extraction with a workflow platform to take a comprehensive, low-cost approach to invoice automation. By designing custom workflows for each client, extracting data to the charge and sub-charge level, and empowering users to manage their processing cycle across all recurring invoice categories, Invari is often a great fit for clients of all sizes to solve this massive problem of these hidden costs.
Regardless of which approach is the right fit, optimizing Accounts Payable’s approach to invoice processing is essential to remain competitive in today’s cost-cutting business landscape. Bringing on a partner to help manage the volume of invoices needing payment is the quickest way to achieve savings in this area. If Invari sounds like the right fit for your organization, please reach out to us using the form below.
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Written by: Head of Product Development at Green Cabbage, Bennett Falck