The Cost of Accounts Payable

Calculating the total cost of Accounts Payable & each Invoice

The Cost of Accounts Payable

A common approach for benchmarking Accounts Payable is to calculate the average cost of processing each invoice. Ultimately the cost of processing an invoice will varies hugely from business to business.

Research from the Hackett group and Gartner put the average cost of processing an invoice in the UK from between £4 and £25 with certain complex or error prone processes costing up to £50 per invoice.

Many calculations focus on the direct costs but there are significant indirect costs or burdens of AP that should also be considered for a true representation of costs.

Calculating the Cost Per Invoice

A fair evaluation of cost per invoice should at least include the following:

Full loaded costs of all headcount (Full, part-time or seasonal) involved directly in the AP process
Costs of all associated software, IT infrastructure and other support costs relating to AP
Accounts Payable teams can also incur additional or unnecessary costs through late payments, missed early payments or worst supplier terms, fast payment fees. If there are significant these should be included.
Inefficient Purchase to Pay (P2P) and Account Payable operations can be a huge drain on other departments and approvers. Approvers need to Approver payment/ Receipt. Processes break down and queries from suppliers result in unnecessary burdens across the organisation. It is best practice to at least include the Approver’s time.

Benefits Of AP Automation Beyond A Lower Cost Per Invoice

It is important to note that many AP automation projects only focus on the possible direct cost savings that can be achieved rather the other important benefits that can be realised through AP Automation and are not reflected in the cost saving mode.

For example, smaller businesses processing less than 500 invoices a month, the value of and case for automating or outsourcing AP is less about the financial savings and more about the time that a person or team gets back to spend on growing or innovating their business not just managing it.

Other benefits missed by a simple cost benefit analysis include:

Better supplier relationships and possibly terms

Downstream potential production or other operational efficiencies, gains and control as a result of P2P and AP improvement

Staff being freed up to focus on added value AP and P2P challenges

Reduced risk and compliance

Better visibility and control of cash flow

Regardless of the processes you have in place for approval and systems you have in place for Accounting, if you are manually handling the data then there will be an opportunity to improve efficiency, free up time and reduce costs by streamlining your AP process.

Contact us in the form below if you would like us to help you calculate your total cost per invoice today vs using one of the automated AP methods.

More Information & How Can We Help?

We offer no-obligation AP/ P2P consultations and assessments to help you understand the different options and identify best approach for your organisation. To find out more or to book a consultation, please call +44 (0)1962 835053, email enquiries@processflows.co.uk, or fill in the form below.

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The Cost of Accounts Payable

Calculating the total cost of Accounts Payable & each Invoice