Transactions make your business tick. The important processes of making sure that you get paid for products and services you sell – and naturally pay the right amount for your purchases – place accounts payable and accounts receivable teams at the core of any organization. How much are you prepared to pay for these processes to run smoothly?
A/P and A/R are information- and often work-intense practices. Despite the ever-increasing digitization of the workplace, finance teams still rely heavily on manual touch-points and costly invoice operator services. It becomes obvious when you dig into the figures of what invoice management actually costs.
Cost of invoice management
Naturally, costs vary between organizations.
It depends on easily quantifiable factors like volume and the number of formats handled. A simple ratio between paper and electronic format provides a valuable metric, which also provides a glimpse of an organization’s digital maturity.
But the cost is just as much the result of highly strategic factors; the overall level of achieved automation, the structure of end-to-end processes, and ultimately the economy of scale. For the enterprise and large public sector organizations, these are crucial factors.
The visible costs are:
Research by Billentis based on case studies concluded that the price to process an average paper invoice is a staggering EUR 17.40.
E-invoices managed in semi-automated processes reach EUR 6.40 on average. Businesses utilizing Electronic Data Interchange (EDI) integrations which connects buyer and seller directly can lower the cost to EUR 1.
E-invoices alone won’t cut it
E-invoices, instead of analog formats, put some ease to the processes. No doubt about it. Instant and loss-less communication between buyers and sellers is an important step forward in the digital transformation of finance operations.
The e-invoice volume grows already steadily at some 10-20% each year and is expected to accelerate as soon as the EU directive on electronic invoicing in public procurement is enforced in April 2019.
However, there is still a long way to go. Billentis states in the report that some 90% of all invoices globally are still processed manually. And despite increasing automation capabilities, 30% of all invoices are deviant and must be processed manually. There is obviously room for improvement.
Invoice management creates hidden costs as well. Overpayments, double payments, wrongly managed VAT – the list of hidden pitfalls is long—and not visible in a straight-forward cost estimate.
These mistakes are sometimes discovered, thus adding to the workload of your organization, but often they slip through the cracks. In any case, the result hurts the bottom line as up to 1% risks being lost in the transaction.
Moving away from paper and PDFs, and adopting e-invoices and a modern invoice management software is undoubtedly the fastest solution for organizations to increase efficiencies, reduce costs and ultimately reach their automation potential.