Painful Labor: The Hidden Costs of Inefficient Invoice Processing

Chris Heinz - September 12, 2013

Anyone who has given birth can attest: Labor is painful.

But not so well known is the hidden labor cost associated with many accounts payable invoice processes.

EnergyCAP Canada, our Canadian reseller, recently listed a number of the costs associated with processing utility invoices. Notice how many are labor-related:

  • Direct Labor Costs (processing incoming mail, entering data, verifying data)

  • Indirect Labor Costs (checks and report control processing, exception item processing)

  • Equipment Costs (postage metering equipment, data processing hardware)

  • Postage and Supplies Costs (postage, envelopes, checks)

  • Administrative and Overhead Costs (occupancy expense, supervisory overhead)

  • Other Costs (bank fees for late payments, communication)

Stack of Unpaid Bills and Envelopes

According to an article in Business Finance Magazine called, Cutting the Fat from Accounts Payable, the cost for direct labor alone for accounts payable processing is about $3.31 per invoice. And direct labor represents 30% of total payables costs when other costs like indirect labor, equipment, supplies, etc., are considered.

Using this research, EnergyCAP Canada advises their clients to expect to pay $10.50 - $11.00 per invoice. Remember, this cost doesn’t include the actual charge of the invoice, only the cost of processing it.

In her article, Ivy McLemore writes,

“Typically, the accounts payable process represents the greatest opportunity for improvement in the accounting function.”

To find out how one municipality has reduced labor pains, read Birthing the EDI Vision, and discover how they automated accounting processes.

Topics: Energy Management

Chris Heinz

About the Author
Chris Heinz

Chris is Vice President of Human Resources for EnergyCAP, Inc., which helps organizations get value from their utility bills through energy management software. He's an Associate Certified Coach by the International Coach Federation, a Gallup Certified Strengths Coach, and a Certified Professional Life Coach. He also started to help people love their life and love their work.

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