Cost per Invoice

Cost per Invoice

KPI Details

Cost per Invoice measures how much, on average, the Accounts Payable (AP) Department spends to process (pay, or schedule for payment) a single invoice. A high unit cost for a single invoice may be related to several inefficiencies within the AP Department, including highly manual invoicing procedures (e.g., large amount of invoices submitted on paper or in PDF format, manual data entry and payment configuration, etc.), a high rate of invoice disputes with vendors, low employee productivity, and/or poor training and employee oversight within the AP function. Any formal analysis of AP Department processes typically reveals opportunity for improvements to inbound data quality and submission standards, which can also greatly reduce the cost to process a single invoice.

KPI Definition

The total amount of expense incurred by the Accounts Payable (AP) Department divided by the total number of invoices processed by the AP Department over the same period of time. Total AP Department expense should include all labor, technology and other overhead costs related to running the AP function.

KPI Best Practices

• Payments are electronically matched and disbursed where possible
• Standard data input for invoice payments to reduce errors and re-work
• Procurement actively enforces use of vendor POs

KPI Calculation Instructions Cost per Invoice?

Two values are used to calculate this KPI: (1) total expense incurred by the Accounts Payable (AP) Department, and (2) the number of invoices processed, or paid/scheduled for payment, by the AP Department over the same period of time. Total AP Department expense should include personnel costs (compensation and benefits), technology costs, payment processing fees and any other overhead costs related to running the AP Department, and processing invoices, on a day-to-day basis. Include only invoices paid out by the company to a third-party (vendors, etc.) in the denominator for this calculation.

KPI Formula :

Total AP Department Expense / Total Number of Invoices Processed