If a dollar saved is a dollar earned, then many businesses are losing hundreds of dollars every month with their inefficient accounts payable processing. Just a simple look at the cost per invoice can quantify the money lost in the process.
How much is your business losing every month?
The average cost per invoice of business varies between $15 and $40.Agreed that the size of invoice varies and so does the cost per invoice, according to the industry and the niche, the average tends to be the same.
Before Outsourced Bookkeeping was on-board, some of the clients even had to cop $60-$80 per invoice processed. Some were even unable to determine the total cost incurred due to the ambiguity of their manual Accounts Payable process.
“Almost one-third of the companies that resort to manual or even hybrid Accounts Payable find it hard to determine the cost per invoice”, says one of our Accounts Payable experts at Outsourced Bookkeeping.
What causes higher cost per invoice?
Cost per invoice is the direct result may inefficiency in the Accounts Payable Process. Each of the weaknesses in an AP process translates to delayed processing or even fraud which costs both time and money ultimately pushing the cost per invoice to inappreciable levels.
So, here are a few factors that increase the cos per invoice in almost every business:
- Errors in processing: Manual errors result in revisions which cost time if caught and money if they were overlooked.
- Labour: Manual Accounts Payable demands for charge number of work hours ramping up the total cost for invoice processing.
- Vendor relationships: Consistent orders followed by on-time payments can pave way for volume discounts that result in cost savings. Lack of right vendor relationships does increase the chances of fines and penalties furthering raising the total cost per invoice.
- Extraneous expenses: Manual AP increases the need for office supplies, mail costs and other manual expenses which when the invoice volume is high doe contribute to a higher cost per invoice.
How to bring down the cost-per-invoice in AP?
Even businesses that are devoid of all the problems above suffer from higher-than-normal costs per invoice essentially due to a lack of seamless Accounts Payable process. A lengthy, ambiguous AP with lax processes is vulnerable to every problem which burns time and money for the business. So how to lower the cost-per-invoice in Accounts Payable? Read on to know:
So how to lower the cost-per-invoice in Accounts Payable? Read on to know:
Streamlining your Accounts Payable with automation is the simplest way to reduce the cost per invoice. With automation, it is not just about reducing manual processes and building simple workflows for a streamlined approach.
Automation also gives the ability to customize and build a tailored AP process that in fewer steps processes invoices at a greater speed with reduced errors, and decreased labour – ultimately cutting down the total cost incurred for processing. If full-scale automation is not an option right now business can also level up their AP process and reduce the cost per invoice with following simple tips:
Adopt OCR instead of manual data entry: Cutting down the manual data entry is estimated to slash 60% of the errors and re-dos when it comes to processing. Even better one can also outsource the digitization of invoices in case the invoice volume runs high. Here are a few case studies on how Outsourced Bookkeeping brought down the processing costs by providing outsourced AP services.
Simplify the workflow and reduce responsibility: Consolidating all the data into a repository and reducing the total check runs simplifies the workflow and saves time in processing. And speaking of check runs, it is not surprising to find out that most CFOs and even higher-ups are involved in assembling the check runs. The best practice? Let the AP department run the ageing and chose the invoices that need to be paid and assemble the right documents to simplify verification and signoff.
A vendor portal makes it easy to address the issues: A simple setup of vendor and supplier portal has drastically cut down the extra work and delay in processing for one of our clients at Outsourced Bookkeeping.
The vendor portal consolidated everything from the order and tax records, payment details, merchant and address information, and invoice tracking. This simplified the communication by setting the right expectations and bringing both parties on the same page – ultimately accelerated the invoice processing and eliminating delays due to extra work.
Outsource Accounts Payable to accounting firm: The three tips above have transformed Accounts Payable for our clients at Outsourced Bookkeeping. However, businesses will need sizable help from Accounts Payable technology to even implement the above practices and not every business may be blessed with enough help to get it done. In such cases, outsourcing Accounts Payable can be the best bet for any business that aims to reduce its cost per invoice.
At Outsourced Bookkeeping, we have equipped with the latest Accounts Payable technology that can automate your entire Accounts Payable Process to bring down the cost per invoice to a healthy level. If end-to-end automation is not your choice, we can also automate the right parts in AP and fill the existing gaps to streamline and reduce the AP costs incurred. If you are looking for a remote accounting firm with a specialization in Outsourced Accounts Payable, you can contact us here: https://outsourcedbookeeping.com/