AP Automation CalculatorHow to calculate cost per invoice
Cost per invoice = average minutes per invoice ÷ 60 × loaded hourly cost + other cost per invoice
Average minutes per invoice = minutes for a clean invoice + (share of invoices with an exception × extra minutes per exception).
Worked example
These are example numbers to show the method, not benchmarks: 1,500 invoices a month, 8 minutes for a clean invoice, 20% with an exception taking 35 extra minutes, staff at 38.00 an hour and 0.50 of other cost per invoice.
| Average minutes: 8 + 0.2 × 35 | 15.0 |
| Staff cost per invoice: 15.0 ÷ 60 × 38.00 | 9.50 |
| Other cost per invoice | 0.50 |
| Cost per invoice | 10.00 |
| AP hours per month | 375 |
In this example 20% of invoices have an exception, but they take 47% of AP time. That is why cutting exceptions often saves more than processing clean invoices faster.
What to count
- Minutes: receiving, keying or checking, matching, chasing approvals, answering supplier queries and paying. Time a sample of real invoices.
- Exceptions: any invoice that can't go straight through: no PO, price or quantity mismatch, missing receipt, unknown supplier, missing approval.
- Other cost: paper, postage, printing, storage, bank fees per payment if you want them in.
Questions
How do you calculate cost per invoice?
Cost per invoice = (minutes spent per invoice ÷ 60 × loaded hourly cost of AP staff) + other costs per invoice such as paper, postage and storage. Use the average minutes, including the extra time exceptions take.
Why do exceptions matter so much?
An exception adds time to one invoice, but if exceptions take much longer than clean invoices they can account for most AP hours even when they are a minority of invoices.
What should the loaded hourly cost include?
Salary plus employer taxes, benefits and overheads you allocate to staff, divided by working hours. Your finance team usually has a standard figure.
Does automation remove exceptions?
It speeds up clean invoices and can catch some exceptions earlier. Exceptions caused upstream, such as missing POs or prices that don't match the contract, need fixing where they start.
Faster invoices help. Fewer exceptions help more.
Exceptions usually start in purchasing: no PO, a price that doesn't match, a missing receipt. Tick your causes to see where the fix sits.