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Accounts Payable Software Moves Companies Toward Efficiency, Broader Automation


This is the story of business’ never-ending search for efficiency and the role automating accounts payable can have in reaching this elusive goal. Elusive because efficiency is a moving target, changing with new technology, accounting standards, laws and customer expectation.

One way to improve efficiency is moving your accounts payable (AP) department to a fully automated accounts payable invoices system.

Originally inspired by the paperless office, it all started with e-invoicing in the mid-1960s when a handful of pioneering companies established data links to transfer documents including purchase orders and invoices.

Seeking a reliable transfer of data, they developed the first proprietary electronic data interchange (EDI) systems, but they initially lacked standards. That was, until a standards institution under the umbrella of ANSI called the Accredited Standards Committee X12 standardized EDI processes. The ANSI X12 EDI standard lasted through the 1990’s.

More recently, companies built web applications with functions catering to both suppliers and customers. These new user-friendly apps enabled online submission of invoices as well as EDI file uploads. These services were among the first to allow vendors to present invoices to their customers for matching and approvals.

Today, many businesses are switching to electronic invoicing services such as those offered by ExpenseWatch, fully automating the invoice processing in the accounts payable departments.

According to the 2012 Global E-Invoicing Study, 73 percent of those surveyed said they used electronic invoicing in 2012. This was a 14 percent increase over 2011. However, regardless of the reported benefits, many small to medium-sized businesses (SMEs) have still not taken the steps to automate their process, and consequently, they are wasting money.

According to PayStream Advisors, the demand began growing at a compound average annual growth of 13 percent in 2013, at $280 million.

The AP software market is shifting to more capabilities – in essence – the entire purchase to pay process. Today more and more companies are finally switching to electronic invoicing services –a paperless, online vendor invoice system–fully automating their accounts payable departments.

ExpenseWatch offers a comprehensive payable invoice management system. Of course, the amount of time devoted to processing invoices can vary depending on your company’s size.

The ultimate goal of any AP software system is to reduce errors, speed up any efficiencies and improve the company’s overall processes.  Plus, if you are like most accounts payable professionals, you are also worried about the massive overuse of paper, as well as the cost of storage for this paper.

The Institute of Finance and Management reported that “the amount of time devoted to processing transactions is less in larger companies.”  What about small to medium-sized companies?

Calculating Cost per Invoice

You can determine how well your AP is functioning by determining the cost to process an invoice. This calculation can be challenging. Moreover, it is not that accurate if all you do is get a rough estimate by dividing the number of invoices you process annually by the total annual salaries of employees in your AP department!

Christopher Elmore, the author of The 8 Pitfalls of Accounts Payable Automation, offers the following easy process to determine your real cost-to-process-an-invoice:

  • Map the process. Follow an invoice through its entire process, beginning with the mail. How much is it costing to open the envelope, and then distributing it? What happens next? Track the process all the way through until when the payment is made. Then track what happens after the invoice payment is made. This might include costs for filing, or cost of research if the question were to come up.
  • Whom are the people involved in the AP process? How many people in your organization are involved in accomplishing each step in the mapped the process? Don’t list just those in AP, but include all the employees in your company who were involved in things like the approval process.
  • How much time did the process take? Determine their average time per hour or minute, for how long each task takes. Now do the math: multiply the number of people by the amount of time spent on each task by their average salary for the estimated dollar value representing the investment of time and cost to accomplish these tasks. Once you have this dollar figure, divide it by the total number of invoices your company processes to get the real annual cost per invoice for your AP department.

It is likely that you are rather surprised by the total costs involved in your company’s AP process. By the way, most companies average between $5 and $15 per invoice, according to Paystream Advisors. Implementing a digital AP process will impact your company operationally by improving invoice entries, speeding up the approval process, eliminating time waste, and reducing the cost for invoice processing costs.

Moreover, there is another benefit: Any company that has better visibility of their process thanks to AP automation, usually turns their invoices around faster, and can often take advantage of vendor discounts for rapid payment.

If this process has helped you determine that it is time for a change, please use the form to the right to contact us to discuss what your company will need to efficiently create, approve and pay vendor invoices. For more information, fill in the form on the right and one of our experts will reach out to you shortly.

Posted (7-21-15)

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