Invoice Processing Cost Savings Analysis

AP One Invoice Processing

If you read our last post about Working Smarter, Not Harder with A/P One, we mentioned how CoreIntegrator’s  A/P One can save companies lots of time and money. We also did a brief analysis of how much it costs to process a single invoice and looked at the total spent over an entire year.

I want to break this process down even more and show more details in the costs to process invoices manually, and the savings realized when A/P One is implemented.

We’re going to look at one metric in our analysis, which is the ‘hard cost’ of an Accounts Payable (AP) clerk’s time.

There are many other efficiencies gained by automating your accounts payable process, but they are more difficult to associate costs and calculate time saved.

Let’s take a look at the analysis of processing invoices manually…

This customer receives a mix of paper invoices and PDF files via email. The AP clerk has to coordinate getting the paper to the approver or managing approvals via the company email system.

Paper gets lost, emails are hard to manage, the status of invoices ‘in process’ is hard to track. The entire process of managing invoices and the approval process is very time consuming.

Industry average values for a company processing 500 invoices/month manually

  • The company would have one full time AP person that spends about 5 hours a day processing invoices.
  • That person’s cost to the company is about $27 per hour.
  • This person can action about 5 invoices per hour – 1 every 12 minutes.
  • The labor costs alone to process the invoices is about $135/day.

Manual invoice processing

Let’s take a look at efficiencies gained when the same invoices are processed using A/P One.

The customer or vendor can now scan or email invoices directly into the A/P One solution.

Within 24 hours, the invoice shows up in the clerk’s work queue with important data entered into the digital form, ready to be processed.

The AP clerk simply confirms the data, selects the GL expense code and electronically sends the invoice to the approver. The AP clerk can track the entire approval process, which can have multiple levels. After approval, the AP clerk does a final check of everything and then submits the payable transaction to the accounting system.

After A/P One implementation

  • That same AP person can now process about 30 invoices per hour – 1 every 2 minutes
  • They now only spend about 50 minutes per day processing invoices
  • The labor cost to process invoices went from $135/day down to about $22/day
  • The net cost savings for the labor cost alone is about $113/day or over $29K/year
  • The net time saving for each invoice is 10 minutes or about 83 hours of extra time per year
  • The person processing invoices now has over 2 extra weeks of time available to work on other projects

Obviously, the A/P One solution costs money to use, so the company can’t realize the entire cost savings shown above.

The good news is that A/P One costs way less to use than the money saved, so there is a positive Return on Investment (ROI) almost immediately.

ROI for the A/P One project

  • Using A/P One to process an average of 25 invoices/day would cost about $37.50
  • The cost savings/day shown above is $113.00
  • The ROI/day would be about $75.50
  • The annual ROI would be almost $20K!

Summary

We analyzed a company that action 500 invoices/month, which is not a large amount.

The savings increase as the number of invoices increases.

You can imagine the time and cost savings if the company processed thousands of invoices/month.

Plus… the cost of the A/P One solution goes down when you process a more invoices, so your ROI is even more with higher volumes.

In addition to the AP clerk times savings, there are other efficiencies gained when automating your AP processes with A/P One.

Here are some examples:

  • The ability to approve invoices electronically, even while remote with a tablet or mobile phone.
  • The ability to have visibility of all invoices that are either in process or completed.
  • Companies can take advantage of early payment discounts and avoid late payment penalties.
  • Audits are simplified as all invoices and documents are available electronically.

As you can see, after it’s broken down, companies waste a TON of time and money on employees processing invoices for the bulk of their work day.

Now that you’ve seen the numbers in this cost-savings analysis, we hope that you consider using CoreIntegrator’s A/P One as the invoice processing and approval workflow solution for your company.

We have a detailed costs savings and ROI tool that you can run using your specific costs and metrics and would be happy to run a report specific for your organization.

Contact us for more information, or to get your report today.