What Paying Vendor Invoices is Really Costing You
The cost of paying vendor invoices extends beyond the amount owed to your vendors, but just how far?
Accounts Payable professionals have been underestimating the cost of paying their vendor invoices for years. And the chasm between their estimation and reality is surprisingly large.
A recent survey revealed half of all accounts payable professionals believe vendor invoices cost less than six dollars to process and pay. In reality, these costs can run over $12 per invoice. With the majority of businesses processing and paying more than 100 vendor invoices every month, this disparity in estimation can run up a large amount of unrealized expense in a short amount of time.
Where is this unrealized expense coming from?
To answer this, it’s critical to first understand the full life of a vendor invoice. While paying a vendor invoice seems like a quick and straightforward process, it isn’t a simple as you think. The cost of invoice processing starts to incur as soon as the invoice is received, and will continue to incur until the correct amount is paid and in the hands of your vendor.
Throughout this end-to-end process, there are three distinct steps that are secretly driving up costs without you even realizing it:
- Invoice Capture Costs: Result from inaccuracies and adds up in the form of time and energy required to go back and correct errors while reconciling with impacted vendors.
- Invoice and Payment Approval Costs: Result from excessive time spent chasing down approvals from department heads in other offices that may or may not be out of the office. This time can also lead to greater costs resulting from missed opportunities to capitalize on early-pay discounts.
- Payment Execution Costs: Result from the prolific use of paper checks and associated costs of printing them, postmarking them, as well as missed opportunities to reap the benefits of credit card rebate programs. Costs also increase because of invoice payment fraud, which is now impacting 78% of businesses.
Ways to manage these costs
In reality, many of these costs can be mitigated, or even eliminated, with minimal effort.
It’s no secret that the more time you spend performing manual data entry, the more prone to mistakes you become over time. Capturing vendor invoices in small doses can help you minimize errors, and reduce time spent reconciling them.
Additionally, shifting spend over to corporate credit cards can easily address several of these costs. Not only will this reduce your risk of fraud, it will also enable you to capitalize on the rebates you’re missing with paper checks, and also speed up payment execution so you can qualify for more early-pay discounts.
Investing in an accounts payable automation solution is the most effective way that businesses have eliminated unnecessary AP expense, and in the process saved as much as 64 hours each month. However, a key to maximizing your investment in automation is choosing a solution that automates the entire invoice-to-pay process, and not just an individual component within that process.
MineralTree Invoice-to-Pay integrates directly with your corporate bank account and accounting system, and keeps overhead to a minimum by paying for itself as quickly as sixty days after its simple and straightforward implementation.