BLOG / What is the True Cost of Manually Processing Invoices?

In today’s economically volatile environment, it is essential for organisations to closely monitor their operating costs. While economic uncertainty is beyond your control, managing expenses effectively is within your reach. At Cobwebb Communications, we understand the challenges you face and offer solutions to help you navigate these complexities.

The Cost of Manual Invoice Processing

To understand the real cost of manually processing invoices, it’s crucial to consider various factors and how automation can mitigate these expenses.

Finding the Right Equation

Many organisations use a basic ratio to estimate the cost of processing a single invoice. However, this rough estimate often lacks accuracy. A more precise method involves calculating the total cost of processing invoices and dividing it by the total number of invoices processed over a specific period. Here are the key elements to consider:

1. Labour Costs: Determine the number of employees required to process an invoice, their hourly pay rates, and the time spent on invoices each month. Multiply these figures to estimate labour costs. This calculation can become complex if there are significant discrepancies in pay rates or time invested among employees.
2. Infrastructure Costs: Calculate the annual cost of each tool used for invoice processing, such as ERP systems, and break it down into a monthly cost. Sum these monthly costs.
3. Supplies: Add up the monthly expenses for supplies like ink, paper, envelopes, and stamps. While these costs may seem minor, they accumulate quickly when processing a large volume of invoices.
4. Transaction Fees: Include bank charges. Add these fees to the total costs.

Once you have all these figures, sum them up and divide by the number of monthly invoices to get a rough estimate of your expenses.

Hidden Costs of Manual Processing

While the above calculation provides a baseline, it doesn’t account for hidden costs, such as:

• Human Error: Manual processes are prone to mistakes like incorrectly coded line items and data entry errors, leading to delays, fines, and additional labour costs for corrections.
• Fraud: Without the visibility and audit solutions that automation offers, the risk of fraud increases.
• Communication Breakdowns: Delays in the AP approval process can occur when invoices sit in inboxes or on desks, wasting time that could be spent on higher-value tasks. Delayed payments can incur interest charges or disrupt your supply chain if vendors suspend their relationship with your business.

These hidden costs, although harder to quantify, significantly impact your overall expenses.

Stop Throwing Money Away

Adopting an automation solution like Cobwebb Cloud Capture Finance for your AP process can drastically reduce these costs. Automation safeguards your organisation against wasted time, errors, and fraud. Here’s how:

• Reduced Data Entry: AP teams typically experience an 80% reduction in data entry efforts.
• Enhanced Visibility: Full visibility of an invoice’s lifecycle, from receipt to payment, eliminates lost documents and ensures timely resolution with automated approval workflows and reminders.
• Minimised Error: Automation achieves a 99% accuracy rate, virtually eliminating manual errors.
• Improved Audit Trails: Increased visibility creates a clear audit trail, reducing fraud risks and allowing for control measures like separating duties in the approval process.

These benefits collectively reduce the time and money spent on accounts payable.

Discover the Benefits of Automation

To learn more about how automation can transform your organisation’s invoice processing and reduce costs, contact Cobwebb Communications today for a free assessment. Let us help you optimise your AP process and secure your financial future.