How much are your invoices costing you? While you are (hopefully) getting paid every time you send out an invoice, you still need to find ways of minimising how much each invoice is costing you.
That’s right, invoices can cost YOU a lot, just like your customers who are the ones paying them. The process of generating, dispatching, processing, and occasionally fixing invoices can be very demanding. Like a hungry beast that returns to the finance department every month-end, invoicing looms over the team and seems to never be satisfied until all spare time, energy and dollars are consumed.
By calculating the true cost of sending an invoice, business leaders can be empowered to make solid data-driven decisions about improving their invoicing process. This ultimately affords their business the freedom to grow, safe in the knowledge that they’re backed by a scalable invoicing automation platform that actually saves them money.
How much does it cost to manually create and send an invoice?
The short answer is: Anywhere from $12 – $50, depending on who you ask.
Freshbooks estimates that the average invoice costs around $15 USD to process, but they concede that it can range between $12 to $30. For larger companies, with complicated accounts receivables processes, this can reach as high as $40. You’d better be sending out some hefty invoices to justify those kinds of costs.
If mistakes are made on an invoice which, let’s face it, tends to happen from time-to-time in high-volume organisations, then Freshbooks estimates the cost of fixing these mistakes can be over $50 USD per invoice.
Other sources provide similar figures. SAP Concur states that an average invoice will cost $12.9 to process, while The AP Network, via Beanworks, puts the number again at around $15. The bottom line is that manually-created invoices are expensive.
Companies who sell usage-based services like voice, data or energy can find their invoicing costs further increasing due to each month of unique usage requiring manual calculation. Complex accounts payable processes such as these can cost nearly $40 per invoice.
Working out how much it costs your team.
You can easily work out the average cost of sending an invoice by your company by taking the amount of time your finance team spend calculating usage and creating invoices, multiplying it by their average hourly rate and then dividing it by the number of customers you have, or invoices you send in a month.
( t x r ) / i = c
t is the time, in hours, your finance team spends on invoices
r is the team’s average hourly pay rate
i is the quantity of invoices sent
And c is the average cost for your team to send an invoice.
For example, if 2 staff members who are paid $40/hour spend a full 40 hour week working on invoicing for 150 customers, the true cost of each invoice for this team would be $21. This is a significant amount and we’re still ignoring the (impossible to count but not $0) opportunity cost of this team not working on other workplace tasks in the meantime.
Invoicing cost calculator
Let’s put the above formula into practice and find out just how much money your invoices are costing. You can do this right now with our free interactive calculator.
Reducing the cost using billing automation
How can you reduce the costs associated with invoicing? One of the most obvious ways is to remove the manual element completely and use a billing automation platform to handle invoicing for your business.
Automated invoicing has the potential to be a lot cheaper than manual invoice generation, and we mean a LOT. Costs can come down to around $3.50 per invoice.
Emersion is a business and billing automation platform designed to allow MSPs, telcos and utility providers to systemise and grow using powerful automation tools.
By integrating to local telco carriers, distributors and payment gateways, Emersion is able to automate your entire subscription billing process including usage calculation, invoice generation and dispatch, payment processing and reconciliations. This should save even the smallest of businesses at least 40 hours of manual work every month.
We have a proven track record of helping MSP, telco and utility businesses in APAC and North America reduce their costs and grow through systemising and automating away unnecessary work in favour of smart, integrated automation in a centralised, powerful platform.
You can find out more about the Emersion platform here.