How much does it cost to process an invoice?

 How much does it cost to process an invoice?

Managing accounts payable processes efficiently is crucial for any organization, impacting cash flow, vendor relationships, and overall financial performance. One significant aspect of accounts payable is the processing of invoices. Traditionally, manual invoice processing has been a time-consuming and resource-intensive task, leading to high costs of processing an invoice.

However, with the advent of automation technologies, businesses now have the opportunity to streamline and optimize their accounts payable processes, significantly reducing the cost of processing an invoice.

In this post, we will explore how automation can improve your accounts payable cost per invoice, enabling you to enhance efficiency, reduce errors, and drive savings.

How much does it cost to process an invoice?

The cost of processing an invoice encompasses various factors, including labor, technology, infrastructure, reconciliations, and more.

Manual invoice processing involves multiple manual touchpoints, such as data entry, verification, approval routing, and payment processing. These tasks can be time-consuming and prone to error, leading to inefficiencies and increased costs.

According to industry studies, the average cost of processing an invoice manually can range from $5 to $20 per invoice, depending on the organization’s size and the complexity of the process.

The costs of processing an invoice can be categorized into direct and indirect costs. Direct costs include labor, printing and mailing, and storage costs for physical invoices. Indirect costs encompass the opportunity costs of delayed payments, potential late fees, and the impact on vendor relationships.

Additionally, manual processing increases the risk of errors, leading to invoice discrepancies, payment disputes, and time-consuming reconciliation processes.

It is important to note that the average cost of invoice processing can vary significantly depending on the organization’s existing operations, the volume of invoices, and the level of automation implemented.

By adopting automation technologies, businesses can reduce these costs significantly and achieve a more streamlined and cost-effective accounts payable function.

How long does invoice processing take on average?

The average time taken to process an invoice manually can vary depending on several factors, including the complexity of the invoice, the number of approvals required, and the efficiency of the existing process.

Manual invoice processing often involves time-consuming steps, such as data entry, manual verification, routing for approvals, and manual filing.

Studies have shown that manual invoice processing can take a few days to several weeks.

Delays in invoice processing can lead to negative consequences, including late payments, missed early payment discounts, strained vendor relationships, and increased operational costs.

Moreover, the longer it takes to process an invoice, the higher the likelihood of errors and discrepancies, further prolonging the reconciliation process.

In the next section, we will explore the steps involved in invoice processing in detail.

What does invoice processing include?

Invoice processing is a comprehensive workflow involving several steps, from when an invoice is received to the final payment.

Understanding the various components of invoice processing is essential to identify areas for improvement and implement automation effectively.

Here are the critical stages involved in the invoice processing cycle:

  1. Invoice Receipt: The process begins with the receipt of an invoice from a vendor or supplier. This can be in various formats, including paper invoices, PDFs, or electronic data interchange (EDI) files.
  2. Invoice Capture: The next step is to capture the invoice data accurately. This involves extracting relevant information such as invoice number, vendor details, invoice date, line item details, and corresponding amounts. Manual data entry can be time-consuming and error-prone, leading to delays and inaccuracies.
  3. Verification and Validation: Once the invoice data is captured, it must be verified for accuracy and validated against purchase orders, contracts, or other supporting documents. This step ensures that the invoice aligns with the agreed-upon terms and quantities.
  4. Invoice Approval: The invoice typically goes through an approval process after verification. This involves routing the invoice to the appropriate personnel or department for review and approval based on predefined workflows and authorization levels. Manual approval processes often involve physical paperwork or emails, leading to delays and inefficiencies.
  5. Exception Handling: In some cases, invoices may have discrepancies or require additional actions, such as resolving pricing disputes, clarifying delivery issues, or addressing differences between the invoice and supporting documents. Exception handling involves identifying and addressing these issues to ensure accurate invoice processing.
  6. Reconciliation: Once the invoice is approved, it needs to be reconciled with the corresponding financial records and account balances. This ensures that the invoice matches the amounts recorded in the accounting system and any discrepancies are identified and resolved.
  7. Payment Processing: The final step in the invoice processing cycle is payment to the vendor or supplier. This can involve generating payment files, initiating electronic funds transfers (EFT), issuing checks, or utilizing other payment methods.

Each step in the invoice processing cycle can be time-consuming and resource-intensive when done manually. Implementing automation in these areas can significantly improve efficiency, accuracy, and overall cost per invoice.

What impacts the average cost of processing an invoice?

According to estimates from IOFM, with a low invoice volume (<20,000), organizations may have an average cost of processing an invoice that is $12.98 with automation and $15.97 without automation.

For moderate invoice volume (20,000 – 100,000), the average cost to process an invoice is $4.24 with automation and $6.10 without automation. For high invoice volume (>100,000), the average cost to process an invoice is $3.18 with automation and $3.62 without.

These differences may amount to significant cash flows, so it’s imperative to identify opportunities for cost- or time-savings. Automation can help in this regard.

How to reduce the average cost of processing an invoice?

Several factors influence the average cost of processing an invoice. Understanding these factors is crucial for organizations seeking to optimize their invoicing processing and reduce the cost of invoice processing. The following elements are potential areas of improvement:

  1. Invoice volume: The total number of invoices processed within a specific period affects the overall cost. Higher invoice volumes generally lead to lower average costs per invoice due to economies of scale and increased process efficiency.
  2. Automation: The level of automation implemented in the invoice processing workflow significantly impacts cost. Automation streamlines manual tasks reduces errors, and accelerates the overall processing time, resulting in lower costs per invoice.
  3. Labor Costs: The cost of human resources involved in invoice processing, including personnel salaries, benefits, and training, contributes to the overall cost per invoice. Organizations with higher labor costs will have higher average costs per invoice.
  4. Exception Handling: Dealing with invoice exceptions, such as errors, discrepancies, or missing information, increases the processing cost. Resolving exceptions requires additional resources, time, and effort, which can drive up the average cost per invoice.
  5. Technology Infrastructure: The efficiency and capabilities of the technology infrastructure, including invoice management systems, document scanning, storage solutions, and data extraction tools, impact the cost per invoice. Implementing robust and integrated technologies can optimize the processing workflow and reduce costs.

By understanding and addressing these factors, organizations can identify opportunities to optimize their accounts payable processes and achieve lower average costs for processing an invoice.

This improves financial performance and provides additional cash flow for investment in strategic initiatives, leading to better overall business outcomes. The following section will examine how automation can help with invoice processing.

How automation can improve invoice processing and lower costs

Automation has emerged as a game-changer in invoice processing, offering significant benefits to organizations looking to streamline their accounts payable operations and reduce costs.

Here are some key ways in which automation can enhance invoice processing:

Faster Processing

Manual invoice processing can be time-consuming and prone to delays. Automation expedites invoice processing workflow by eliminating manual data entry and automating repetitive tasks.

Invoices can be digitally captured, validated, and routed for approval with minimal human intervention, resulting in faster labor and volume management processing times. This helps reduce the average cost of processing an invoice.

Improved Accuracy

Manual data entry is susceptible to errors, leading to payment discrepancies and potential financial losses.

Automation leverages advanced optical character recognition (OCR) technology and intelligent data extraction algorithms to capture invoice data from various formats accurately.

This reduces the chances of human errors and ensures data accuracy throughout the processing cycle, thus lowering the time and resources spent. This helps reduce the costs of processing an invoice.

Enhanced Efficiency

With automation, invoice processing becomes more efficient and streamlined. Intelligent workflow automation tools can automate the routing and approval processes, ensuring invoices reach the right stakeholders promptly.

Automated notifications and reminders minimize bottlenecks, reducing processing cycle times and improving overall efficiency.

Cost Reduction

The significant cumulative advantage of automation is the potential to lower the cost of invoice processing.

Organizations can achieve significant cost savings by eliminating manual data entry, reducing errors, and streamlining workflows.

Automation reduces the need for additional staff, minimizes paper usage, and enhances process efficiency, ultimately leading to a lower cost per invoice.

Improved Compliance

Invoice processing automation can enforce compliance with internal policies and regulatory requirements.

Automated validation rules can flag non-compliant invoices, ensuring adherence to payment terms, contract terms, and regulatory guidelines. This helps mitigate risks and provides accurate and compliant processing.

Data Visibility and Analytics

Automation solutions provide real-time visibility into invoice processing activities. Organizations can generate comprehensive reports and analytics to gain insights into invoice volumes, processing times, bottlenecks, and performance metrics.

These insights enable informed decision-making, process optimization, continuous improvement, and business efficiency.

By harnessing the power of automation, organizations can transform their invoice processing operations. Automation enhances speed, accuracy, efficiency, and cost-effectiveness, significantly improving the overall accounts payable function.

How Nanonets Automates Invoice Processing

Nanonets is a leading provider of advanced automation solutions to revolutionize invoice processing.

With its cutting-edge technology and intelligent capabilities, Nanonets streamlines the entire invoice processing workflow, delivering unmatched efficiency and accuracy. Here’s how Nanonets automates invoice processing.

Intelligent Data Extraction

Nanonets leverages advanced optical character recognition (OCR) technology and machine learning algorithms to extract relevant data from invoices accurately.

It can handle various invoice formats, including scanned documents, PDFs, and digital invoices.

The system automatically captures essential details such as vendor name, invoice number, date, line items, and amounts, eliminating the need for manual data entry.

Automated validation and verification

Nanonets can deploy rules to ensure data accuracy and integrity.

It performs checks for duplicate invoices, missing information, and compliance with predefined rules. Any discrepancies or anomalies are flagged for review, reducing the risk of errors and fraudulent activities.

Streamline the entire workflow process

Nanonets automatically routes invoices to the appropriate stakeholders for review and approval based on predefined rules and workflows.

The system sends notifications and reminders, ensuring timely actions and reducing processing cycle times.

Stakeholders can collaborate, communicate, and track the status of invoices within the system, improving transparency, speed, and accountability.

Integrate with existing systems

Nanonets can integrate existing systems, such as ERP (Enterprise Resource Planning) software, accounting systems, and other applications, enabling smooth data exchange and synchronization.

This integration eliminates the need for manual data transfer, reducing errors and enhancing process efficiency.

Nanonets can also efficiently handle exceptions or discrepancies in invoices with its intuitive interface.

The system flags discrepancies, such as pricing mismatches or incomplete information, allowing users to address them promptly. This streamlined exception-handling process ensures accurate and compliant invoice processing.

Nanonets offers comprehensive reporting and analytics capabilities, providing valuable insights into invoice processing performance.

Users can generate customized reports, track key metrics, and identify areas for improvement. These insights help organizations optimize invoice processing workflows, enhance productivity, and make data-driven decisions.

Nanonets empowers organizations with a robust and intelligent platform to automate and optimize their invoice processing, lowering the average cost of processing an invoice.

By leveraging advanced technologies, Nanonets significantly reduces manual effort, improves accuracy, enhances efficiency, and lowers the cost per invoice.

Organizations can thus experience streamlined operations, reduced processing times, and increased productivity, ultimately driving improved financial management and business outcomes.


The invoice processing software market is expected to grow from $22 billion in 2022 to $25.3 billion by 2033, growing at a CAGR of 18%. This points clearly to the growing role of automation in invoice processing.

Invoice processing is crucial for any company to manage its accounts payable process and financial cash flows. Manual invoice processing is time-, labor-, and cost-intensive.

To reduce costs and stay competitive, businesses must automate invoice processing. Based on IOFM’s 2021 report on the future of accounts payables, it has been found that 51% of invoices will be processed purely electronically.

Automation eliminates tedious manual tasks like data entry and invoice matching, allowing finance teams to focus on more value-added activities.

With Nanonets’ advanced OCR technology, machine learning algorithms, and seamless integration capabilities, organizations have a powerful tool to enhance their accounts payable processes.

By leveraging Nanonets’ automation capabilities, businesses can unlock new levels of efficiency, accuracy, and cost savings in their invoice processing.



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