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The hidden cost of invoice management

Posted by Per Holmlund
on 10 sep. 2018

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 - places accounts payable and accounts receivable teams at the core in any organisation. How much are you prepared to pay for these processes to run smoothly? 

A/P and A/R are information-intense practises. Despite an ever-increasing digitisation 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 cost. 

Cost of invoicing Billentis Qvalia

Invoice processing costs

Naturally, costs vary between organisations.

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 organisation's digital maturity.

But the cost is just as much the result of highly strategic factors;  overall level of achieved automation, structure of end-to-end processes, and ultimately the economy of scale. For the enterprise and large public sector organisations, these are crucial factors.

So what is the cost?

Research based on case studies by Billentis concluded that the price to process an average paper invoice is a staggering EUR 17.40.

E-invoices managed in semi-automated processes reaches EUR 6.40 on average. Businesses utilising  Electronic Data Interchange (EDI) integrations which connects buyer and seller directly can lower the cost to € 1.

E-invoices alone won't cut it

E-invoices, instead of analoge 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. E-invoicing 

The e-invoice volume grow 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. 

Hidden costs

Invoice management creates hidden costs as well. Overpayments, double payments, wrongly managed VAT - the list of hidden pitfalls is long.

These mistakes are sometimes discovered, thus adding to the workload of your organisation, but often they slip through the cracks. In any case, the result hurts the bottom line. 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 organisations to increase efficiencies, reduce costs and ultimately reach their automation potential.

Learn more How to eliminate invoice errors and increase e-invoicing among your suppliers.

Topics: digital readiness, invoice management, invoicing costs

Written by Per Holmlund

Marketing at Qvalia.
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