Invoicing Is Costing You More Than You Think

Are you still processing customer invoices manually? Are your people still creating paper invoices from scratch each time you bill a customer? Are your people still folding invoices, stuffing envelopes, affixing postage stamps and mailing to your customers? If you answered yes to these questions, then invoicing is costing you more than you think.

The cost of invoicing is often overlooked. Invoicing is one of those low profile, back-office activities that occurs after a sale is made. The vast majority of invoicing is still done manually. If you asked most people what it costs to manually create and mail a customer invoice, they would probably guess around $1.00, thinking of postage, paper, envelope and a little cost to process. In reality the cost to manually process and mail a customer invoice can be 10 to 40 times that amount. Here are some industry estimates of the cost to manually process and mail a customer invoice.

Concur says the average cost is $12.90 per invoice.
Accounts Payable Network estimates an average of about $15.00 per invoice.
Sterling Commerce pegs the cost at $12.00-30.00 per invoice.
Complex invoices may cost even more.

VARIABLE AND INDIRECT COSTS

These estimates take into consideration the variable and indirect costs of manually processing and mailing a customer invoice. The variable costs are obvious – printer supplies, envelopes, paper and postage. Indirect costs including overhead and personnel costs are less obvious, but they are real. Even if you can’t reduce indirect costs if invoicing volume goes down, these resources become available for use in some other more productive activity.

COST REDUCTION POTENTIAL

Automating your customer invoicing can substantially reduce these variable and indirect costs, and save you more than you think. Here are some industry estimates of the savings of automating customer invoicing.

Accounts Payable Network estimates a savings of 60-80% with a cost of $5.00 or less per invoice.
Concur says costs could be 29% lower, which translates into an annual savings of $300K for a company processing 10,000 invoices per month.
Sterling Commerce pegs the fully automated cost at $3.50 per invoice.

OPPORTUNITY COST

As substantial as these cost saving estimates are, they do not take into consideration the opportunity cost savings potential from fully automating customer invoicing. If you are still invoicing manually, it probably takes you two weeks or more after an order is shipped or service provided, to process, mail and have a customer receive an invoice. The opportunity cost of having your cash tied up in the additional time involved in manual processing can be very substantial. Think of the boost your company would get from having two or more weeks of additional cash flow.