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The Cost of Paper-Based Invoicing

Today's business environment demands effective management of working capital, and that means more and more companies are turning the spotlight on their AP Departments.

It's about time.

After all, even seemingly small AP errors can add up, becoming a constant drain on productivity, supplier relationships and the bottom-line and complexities in today's global supply chain only make the problems worse. In fact, new research from Sterling Commerce reveals that companies can gain significant cost benefits from updating certain routine AP practices, such as cross-border invoicing. Sterling Commerce found that by automating country-specific mandates for cross-border invoicing around processing, archiving and auditing, organizations can eliminate error associated with manual processing and reduce related penalties and fines.

According to the survey:

On average, each paper invoice error costs companies $53.50 to rectify.

Accounts payable (AP) departments receive 35 percent of invoices in paper form.

Only a quarter (25 percent) of invoices are sent via a fully-automated electronic method.

Approximately half (49 percent) of companies experienced two audits or more over the previous three years. Of the companies surveyed that had experienced VAT audits, more than one-third (34 percent) incurred fines from tax authorities, and nearly one quarter (24 percent) incurred fines for not being compliant with customer mandates.

In addition, Sterling Commerce calculated the cost savings that are possible if companies move from manual, paper-based invoice processes to fully automated, electronic invoice processing. The analysis showed that businesses could realize:

Cost savings of a whopping 90 percent on the AP side. Sterling Commerce found that manually-processed invoices cost, on average, $30 per invoice to process, while fully-automated invoices average only $3.50 per invoice to process.

Cost savings of 44 percent in the accounts receivable (AR) departments, where manually-processed invoices cost, on average, $4 per invoice and fully-automated invoices $2.25 per invoice to process.

Error reduction of 37 percent on all types of invoices.

Storage costs savings and since more than 40 percent of companies retain archives for up to 10 years, these savings could be significant. For instance, savings amount to 67 percent on AP and 32 percent on AR invoices, since fully electronic invoices of all kinds costing on average $1.30 to store, while paper AP invoices cost $3.90 and paper AR invoices $1.90 each to store.

TAGS: Finance
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