What does processing an invoice by hand actually cost?
Four parts (typing, mistakes, searching, delay), a formula for each, and a table to fill in with your own numbers. No benchmark figures, on purpose.
A sum almost nobody does
Processing invoices by hand does not appear on any invoice, which is exactly why it survives. The cost is spread across small pieces of several people's time, across mistakes found much later, and across document hunts nobody times. This article is a spreadsheet in prose: by the end you can put a number on your own situation.
The four parts
1. The typing
Add up what happens to each invoice: opening and sorting the email or the paper, typing the data into the system, checking it, filing it. Time three or four real invoices. Not the optimistic estimate: the real time, interruptions included.
Monthly cost of typing = volume × minutes per invoice ÷ 60 × hourly cost.
With round numbers, to be replaced by yours: 300 invoices/month × 4 minutes ÷ 60 × 12 per hour = 240 a month. And that is only the typing.
2. The mistakes
A digit wrong in a tax number, a total mistyped, an invoice entered twice. Each one costs the time to find it, usually at month end when it is most expensive, the time to fix it, and sometimes real money: a duplicate payment, tax reclaimed wrongly. Ask whoever closes the month how many hunts there are and how long they take.
3. The searching
How many times a week does someone look for a document? To answer a client, a supplier, the accountant, an audit. If the filing depends on whoever filed that day, each search is minutes; on the bad days, tens of them.
4. The delay
An invoice sitting in an inbox for days is the early payment discount lost, the due date missed, the supplier balance out of date when a decision depends on it. It is the hardest part to measure and, in many companies, the largest.
Your own sum, in four lines
| Part | How to estimate it | Your number |
|---|---|---|
| Typing | volume × min/invoice ÷ 60 × hourly cost | ____ /month |
| Mistakes | fixes per month × average time × hourly cost (+ direct losses) | ____ /month |
| Searching | searches per week × 4.3 × average time × hourly cost | ____ /month |
| Delay | discounts lost + late fees, per month | ____ /month |
| Total | ____ /month |
There are no benchmark figures in this article on purpose. Numbers taken from someone else's company are worth nothing for a decision about yours, and the four measurements above take an afternoon.
What to do with the number
Compare it with what automation would cost you, and be honest about the second column: automation does not take the total to zero. It takes out the typing almost entirely, most of the searching, and a good part of the mistakes. The review of what is doubtful stays, and should stay.
If the sum comes out small, you have your answer and it cost you an afternoon. If it comes out large, you now know how large, which is a better starting point than a feeling.
See it on your own documents
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