The Hidden Cost of an Invoice

The Hidden Cost of an Invoice

What’s hidden in your org’s AP process?

When you think about managing the budget of your Accounts Payable department, you might look at a few key metrics, such as the cost per invoice. To calculate this amount consider factors like employee salary, the cost of printing and archiving paper invoices, and how late/early payments have affected the bottom line. These are common figures to examine when it comes to evaluating new AP solutions in regards to process improvement. Common sense determines that the solution that drives down the operating costs of processing and coding invoices the most must be the right solution for Accounts Payable. However, there is a hidden cost to each invoice of which many finance managers may not be aware.

The Hidden Cost Revealed

The real cost of Accounts Payable lies not in the processing of invoices themselves, but in time spent on getting these invoices verified and approved. This process typically involves AP, approvers and the outlying people the approvers need to communicate with to gain the information required to approve the invoice. Each one of these employees spends valuable time contributing to a successful invoice approval. This time is not accounted for by finance managers calculating the cost per invoice, because it’s largely invisible to their team.

To understand this hidden cost, imagine the Accounts Payable process in your organization. It might resemble this mess:

When AP sends the invoice to a manager for approval, they lose sight of the process until the invoice returns. What they don’t see in the interim is the time that manager spends locating the original person that requested the goods or services (which is not always the same person that appears to be the requestor), and forwarding the invoice to them. This employee might need to communicate with the vendor about the terms of service and clear up any issues, or talk to a team member to ensure that everyone is satisfied from the goods or services received. If another person in a different role needs to approve it too, the entire process is extended, wasting days or even weeks of time. Because AP has no visibility into this process, they also spend too much time chasing approvers (who might be chasing other people in parallel).

All this back and forth communication takes valuable time away from employees at various pay grades – including managers and directors.

Clearly, the hidden cost of an invoice is much higher than what you see by merely calculating the operational costs of the AP department. When many different people are involved it becomes important to look at the total cost of employee time spent on each invoice, and figure out a way to make it as fast and easy as possible for each employee to contribute to the process.

Companies using AI-based invoice management software see their invoices approved up to five 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 five times 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. Learn more about the hidden cost of invoices, and how you can change it in your organization, by talking with a Stampli expert.

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