How Much Does It Cost to Process an Invoice? Metric of the Month

CFOs should look across their people, processes, and technology for small improvements that can add up to big wins for invoicing processes.
Perry D. WigginsDecember 7, 2022
How Much Does It Cost to Process an Invoice? Metric of the Month
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The total cost to invoice customers is an important key performance indicator that measures the efficiency of your sales and accounting teams and the health of the invoicing process. After reviewing cross-industry data on the cost of invoicing, we’ll explore three areas where you can look deeper to reduce spending on this process. 

Perry D. Wiggins

The invoicing process encompasses much more than simply creating and transmitting an invoice. It also includes maintaining customer and product master files, generating customer billing data, transmitting billing data to customers, posting receivable entries, and resolving billing inquiries. The total process cost per invoice includes the total cost of personnel, outsourcing, systems, overhead, and other allocations to those activities.    

APQC finds that top performers (those in the 25th percentile) spend $1.42 per invoice on the process, while bottom performers (those in the 75th percentile) spend more than three times that amount at $6 per invoice.

The cost of invoicing has fallen for all organizations over the past few years. In 2018, bottom performers spent $9 per invoice on the process, while those at the median spent $3.94 and top performers spent $2.

One likely explanation for these decreases is that the rising tide of technology has lifted many boats. Automated invoicing solutions and related technologies are more accessible than a few years ago. The data today reflects the gains many organizations achieved as a result of adopting and implementing those technologies. 

The top performers for this measure may still have some room for improvement, but there is a point at which further cost-cutting becomes counterproductive. Bottom performers, on the other hand, have the most to gain by continuing to bring costs down. For example, an organization could potentially save more than $450,000 for every 100,000 invoices it processes by moving from bottom- to top-performer status.   

Think Holistically

If your performance on this KPI is unsatisfactory to you, you should look holistically across your process, people, and technology for opportunities to cut costs. The following are recommendations for each of those areas.

1. Process. Before you buy any new invoicing technology or systems, scrutinize the invoicing process itself. Designate a team to create a detailed process map of each activity and each handoff. Doing so will allow you to identify redundancies, bottlenecks, and other opportunities for improvement that could boost efficiency. 

For example, if the organization requires CFO approval of all invoices over $20,000, the necessary approvals should be obtained before the invoice reaches accounts payable (AP). Otherwise, AP personnel will have to track down leadership approvals for invoices over $20,000, draining time and productivity. Optimizing the process to remove this inefficiency will help bring costs down and set the stage for technologies that will help lower costs even more. 

2. People. As the costs of labor continue to rise, make sure invoicing teams work as efficiently as possible. That means not only training them for your tools and systems, but also making sure that desktop guides, process documentation, and other knowledge resources are accessible to them in the flow of work. Robust training and knowledge management will help reduce errors and rework. 

A smooth invoicing process requires collaboration and coordination. Working to build a culture that values interdepartmental collaboration, communication, and efficiency not only benefits invoicing but also the enterprise more broadly. Design opportunities for teams to collaborate, get some easy wins, and have fun together to keep building and sustaining this culture.  

3. Technology. A lack of integration between systems is still a challenge and it will keep the costs of the invoicing process high. When the sales team uses a different system than the billing and accounts receivable team, someone along the line will need to translate sales orders as they come into the billing system. This adds time and cost while increasing the chances of errors that require rework. 

ERP systems that automatically integrate sales and accounting data are much more common and accessible than they used to be, even for smaller organizations. Armed with a fully automated system, it will be much easier and more effective to invoice frequently or even daily rather than manually process large batches of invoices weekly or monthly.

Small Wins Add Up 

There is no silver bullet to instantly and permanently lower an organization’s invoicing costs. Bringing costs down in a sustainable way means looking for ways to work more efficiently and collaboratively. Many organizations have found that small improvements in all of these areas add up to make a big difference.  

Perry D. Wiggins, CPA, is CFO, secretary, and treasurer for APQC, a nonprofit benchmarking and best practices research organization based in Houston.