Knowing the cost of processing an invoice is a must for a business owner. Invoicing is an essential aspect of any business operation, and managing it efficiently plays a significant role in financial management.

The traditional manual paper-based invoice processing method is time-consuming and prone to errors. Many organizations have embraced automated invoice processing systems to improve operational efficiency and reduce expenses. Here are some statistics related to the cost savings associated with adopting electronic invoicing:

According to recent market reports, the global invoice processing software industry generated revenues worth USD 22 billion in 2022. Analysts project this figure to surpass USD 25.3 billion by 2033, owing to an anticipated compound annual growth rate (CAGR) of 18% between 2023 and 2033.

Automating their accounts payable process has become increasingly crucial as businesses prioritize efficient accounting practices. With technological advancements, invoice processing is evolving from a tactical back-office task to a strategic one. Moreover, enhancing customer experiences during the electronic invoicing process is gaining prominence in B2C and B2B interactions.

In line with these trends, research findings suggest that by 2021, 51% of paper invoices received by a department’s accounts payable unit could potentially be eliminated due to the widespread adoption of electronic invoicing. Imagine the total cost of paper being used every year.

A poll among industry professionals revealed that almost a third of respondents expect to streamline 25-50% of paper invoices from vendors in the coming years. As a result of automation, accounts payable departments can capitalize on newly uncovered opportunities to add more excellent value to their organizations through initiatives like reward schemes, early payment discounts, extended payment terms, and improved spending controls.

With online invoicing software, you can have processing invoices remotely.

What is the Average Cost to Process an Invoice?

Now, with this understanding of Invoice Processing cost – let us see the average cost to process an invoice.

Research indicates that businesses utilizing minimal or zero automation for invoice processing may incur costs exceeding $10 per invoice. Conversely, those with highly optimized AP procedures with few or no manual interventions typically only spend around $2 or less per invoice.

These figures are based on data compiled by the American Productivity & Quality Center. By implementing automation solutions, companies could achieve an 80% reduction in AP-related expenses.

Undertaking a comprehensive cost-per-invoice analysis represents another essential step towards successfully presenting the benefits of adopting AP automation technologies to senior management.

The invoice cost can arise from multiple sources, such as labour expenses associated with manual data entry, the need for physical storage space to house paper documents, postage and courier fees, late payment penalties, and the risk of human error leading to incorrect transactions or missed deadlines.

By automating various aspects of the invoice processing cycle, businesses can significantly reduce these expenses of processing paper invoice, improve efficiency and accuracy, and ultimately realize substantial savings over time.

Bottom performers, organizations falling within the 75th percentile, spend $6.00 on the total process cost per invoice. Top performers in the 25th percentile pay $1.42 per invoice.

Now, with this understanding of Invoice Processing costs – let us see the average cost to process an invoice.

4 Factors That Drive Higher Invoice Processing Costs

Many enterprises grapple with high costs related to managing their invoice processing tasks. Several underlying factors contribute to escalating expenses when dealing with financial documentation.

Here are the factors which affect the cost of processing an invoice or an invoice costs.

Let us examine four critical drivers behind formal invoice processing charges.

1. Outdated & Incomplete Technology

Firstly, companies often rely heavily on manual methods to handle their invoice-related activities (and that is the core reason for having a higher cost to process an invoice). When employees must physically sort, open, read, and input data into different systems, the potential for errors increases exponentially.

Furthermore, manual processes usually require additional staff members, translating into more salaries and training costs. Automated solutions can mitigate these issues by digitizing incoming invoices, extracting relevant information, and automatically feeding the details into the appropriate platforms.

2. Too Much Paper and Human Cost

Secondly, many firms still maintain extensive paper records and perform manual invoicing. Maintaining massive paperwork increases storage space requirements, printing costs, and administrative hours for organizing and filing documents.

Digital archives, on the other hand, enable easy accessibility, reduced clutter, and simplified retrieval of necessary records. This switch to digital formats helps minimize the financial burden of keeping hard copies. It could be one of the reasons for late payments.

3. Increased Risks of Fraudulent Activities

Thirdly, fraudulent activities might go undetected without proper oversight until significant damage has already been done. Manual invoicing consumes valuable resources and time, leaving companies vulnerable to potential scams.

Integrating anti-fraud measures within an automated system helps protect against illicit activities. It ensures the timely identification of any suspicious behavior. If you automate the process of invoicing you also can avoid duplicate payments to your vendors.

4. Delays in Handling Invoices

Lastly, delays in handling invoices can lead to delayed payments or missed discounts, resulting in lost revenue opportunities. Late payments may also negatively impact vendor relationships, jeopardizing future collaborations.

By streamlining manual invoice processing workflows, companies can avoid these setbacks and foster stronger partnerships with suppliers.

To summarize, high invoice processing costs can be attributed to reliance on manual methods, maintenance of paper records, lack of fraud prevention measures, and delays in handling invoices.

By embracing automation technology to reduce the cost of processing an invoice, organizations can effectively address these contributing factors and significantly lower their overall expenses.

Businesses can unlock considerable long-term savings and enhance operational efficiencies by transitioning to digital platforms, optimizing workflows, reducing the likelihood of fraud, and achieving faster turnaround times.

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6 Ways to Start Cutting Your Invoice Processing Costs

In today’s competitive business environment, controlling expenses while improving productivity remains a top priority for most organizations. One area where many companies struggle to contain costs is invoice processing.

Fortunately, numerous ways exist to start cutting the cost of processing an invoice immediately. Here are six suggestions to get you started to process invoices:

1. Introduce Electronic Invoicing

Paper invoices involve manual data entry and physical storage space, driving up costs. Implementing electronic invoicing eliminates paper, allowing vendors to send invoices directly to your email or through an online portal.

This method simplifies receipt capture, reduces manual input errors, and enables automatic validation checks to verify authenticity. Additionally, it speeds up approval cycles and provides real-time visibility into invoice status changes.

E-Invoicing reduces data entry errors which can also controls operating costs, human and labor costs in any business.

2. Leverage Automation Software

Utilizing dedicated software for automating accounts payable (AP) functions can help optimize workflows and reduce labor-intensive tasks. With that accounts payable staff split works among the team effectively.

Such tools incorporate machine learning algorithms, natural language processing capabilities, and optical character recognition technology to identify and classify incoming invoices quickly.

They can then extract relevant data, validate entries, initiate approval routing, and generate accurate financial reports without human involvement. By automating invoice process, you can drastically reduce the time and effort required to process each invoice.

3. Outsource Non-Core Activities

If some aspects of your invoice processing chain do not constitute core competencies for your organization, consider outsourcing them to specialized service providers. These external teams focus solely on document management, data entry, and accounts payable processing.

By partnering with experts who can execute these tasks efficiently and at scale, you can redirect internal resources to focusing on value-added activities better aligned with your core competencies. This allows your company to benefit from economies of scale, gain access to skilled professionals, and achieve cost savings due to the provider’s optimized pricing structure.

Additionally, working with experienced service providers adds the advantage of implementing best practices and industry knowledge that may have otherwise gone untapped.

4. Enforce Strict Vendor Compliance

Establish clear guidelines and expectations around how vendors should submit their invoices. Encourage them to use electronic billing systems or provide invoices in standardized formats to simplify receipt and processing.

You could even offer incentives such as expedited payment or volume discounts for those who adhere to your preferred submission methods. By enforcing strict compliance policies, you can minimize the need for manual interventions, reduce errors, and accelerate the overall process.

While dealing with your vendors then you can provide more early payment discounts while for late payment you can charge late payment fees. That’s the power of invoice automation.

5. Streamline Approval Workflows

Identify bottlenecks in your invoicing tasks and take corrective action to eliminate unnecessary steps. Define clear roles and responsibilities for invoice review personnel, appropriately delegating authorization levels.

Consider implementing a multi-level approval hierarchy to facilitate quick decision-making and keep the ball rolling. The objective is to remove barriers that cause delay or disruption during the approval stage, thereby speeding up cycle times and enhancing efficiency.

AP Automation solution is a huge blessing for the business where they have to manage large invoice data every day.

6. Monitor Performance Metrics Regularly

Track key performance indicators (KPIs) such as the number of invoices processed per day/week/month, accuracy rates, timeliness, and exceptions handled. Use this data to identify trends, pinpoint areas requiring improvement, and measure the effectiveness of implemented strategies.

Continuously analyzing KPIs will allow you to adjust your approach accordingly and stay ahead of the game in regularly controlling metrics. Regularly also helps identify opportunities for further optimization.

For instance, if you notice a recurring issue involving a particular vendor or type of transaction, you might explore alternative solutions tailored specifically to those scenarios. Moreover, keeping track of performance statistics effectively communicates progress to stakeholders, demonstrating the impact of investments made toward streamlining invoice processing operations.

Maintaining a culture focused on continuous improvement ensures sustained benefits beyond the initial implementation stages.

How Do You Calculate Invoice Processing Costs?

Organizations must examine direct and indirect expenses to accurately assess the costs associated with processing invoices. Direct costs refer to the immediate expenditures related to the Accounts Payable (AP) process, such as software fees, IT infrastructure maintenance, and late payment penalties.

On the other hand, indirect costs arise from inefficiencies and reduced productivity resulting from manually intensive processes, inadequate training, and disagreements over invoices.

To calculate the average cost per invoice, divide the total expenses of the AP department by the number of invoices processed during the specified period.

Including indirect costs in the analysis provides a more comprehensive understanding of the actual price tag of managing invoices.

Consider all the costs like storage costs, intangible costs, or any other hidden costs.

By examining these costs and identifying potential issues, organizations can implement measures to improve efficiency, reduce expenses, and ultimately enhance profitability.

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What Are the Benefits of Invoice Processing Automation?

Invoice processing automation uses technologies like invoice software for small businesses, OCR Technology, machine learning algorithms, and workflow management tools to capture, validate, and manage incoming invoices electronically.

By leveraging these innovative solutions, businesses can significantly streamline their financial operations, leading to numerous advantages:

1. You Will Have Huge Cost Savings

Automated invoice processing eliminates manual tasks such as data entry, document scanning, and verification, significantly reducing operational expenses.

With fewer resources to handle invoices, companies can allocate funds toward other critical initiatives while achieving substantial cost savings.

2. It Will Improve the Accuracy of the Work

Manual input often leads to human error, resulting in incorrect information being recorded, delayed payments, or even lost invoices.

By using OCR technology to automatically capture data, invoice processing automation dramatically reduces the risk of errors, ensuring accurate recordkeeping and smoother financial transactions. This is a great account payable solution.

3. You Can Have Faster Cycle Times

Manual processing involves multiple stages, such as routing documents for approval, resolving queries, and reconciling accounts.

These steps typically lead to lengthy cycle times of accounts receivable, causing payment delays and impacting supplier relationships. Automated systems enable swift processing and faster turnaround times (match invoices), fostering better partner rapport and strengthening supply chain resilience.

4. It Enhances the Transparency

Automated invoice processes generates detailed reports and analytics, providing greater visibility into transactional data.

This increased transparency enables better monitoring of spending patterns and early identification of fraudulent activities, allowing organizations to adapt quickly and respond proactively to potential risks. It also reduces the cost of handling.

5. It also Simplifies the Auditing Process

Electronic records stored in a centralized system simplify auditing processes, making it easier for internal and external auditors to access relevant data rapidly.

Furthermore, electronic records help maintain version control and eliminate misplaced or missing paperwork, reducing the likelihood of disputes arising due to incomplete or inconsistent information. It increases the efficiency of working team.

The ease of accessing and sharing data electronically also facilitates collaboration between different departments and teams involved in the auditing process, streamlining communication and enhancing overall efficiency.

6. You Can Have a Better Compliance and Regulation Adherence

Adhering to regulations and standards is crucial in many industries to avoid fines and reputational damage. Invoice processing automation helps ensure compliance by capturing all necessary data and documentation, enabling efficient reporting and tracking.

This level of accuracy and transparency can alleviate concerns regarding regulatory noncompliance and mitigate the risk of facing legal consequences.

7. You Can Have Improved Supply Chain Relationships

Efficient invoice processing directly impacts suppliers’ experiences, promoting positive interactions and collaborations.

Swift payment cycles, accurate order fulfillment, and transparent communication foster trust and goodwill among trading partners, potentially leading to preferential treatment, volume discounts, and improved negotiating power.

8. Your Business Can Achieve Scalability and Adaptability

As businesses grow and evolve, so do their financial needs. Invoice processing automation allows for easy scalability, accommodating increased volumes of transactions without straining existing resources.

Additionally, this flexibility enables adaptation to changing industry requirements and shifting market conditions, helping organizations remain competitive and agile.


Organizations utilizing invoice software for small businesses for automated invoice management observe remarkable improvements in their invoice processing speed. This collaborative approach empowers Accounts Payable (AP) teams to monitor each step of the approbation process, pinpointing areas requiring attention and offering valuable insight into cash flow projections.

The accelerated approval process represents a considerable time reduction for numerous personnel, permitting them to focus on their primary responsibilities rather than getting bogged down in menial invoice approval tasks. Leveraging automated accounts payable technology enables individuals to optimize their productivity, enhancing efficiency throughout the organization.