How to Reduce the Cost of Processing an Invoice

For enterprise accounts payable (AP) departments, reducing the cost of processing an invoice starts with automating manual tasks, improving visibility, and increasing control. When teams rely on manual work and disconnected systems, delays and inefficiencies drive up expenses and strain both time and resources, which directly impacts your profit margins. 

Let’s explore proven strategies to lower your invoice costs, boost AP performance, and strengthen your organization’s bottom line.

Key highlights:

• Manual invoice processing slows down approvals, increases errors, and drives up costs.
• You can reduce the cost of processing an invoice by automating core tasks like data capture and matching, improving accuracy and efficiency.
• Visibility into direct and indirect costs helps uncover where your AP process is leaking time and money.
• ExFlow AP, built for Microsoft Dynamics 365, streamlines the entire AP workflow, helping you reduce invoice processing costs at scale.

Why Do Invoice Processing Costs Matter?

Invoice processing costs offer a clear window into the efficiency of your accounts payable workflow. 

• When invoice costs are high, it’s often a sign of bottlenecks, such as slow approvals, manual data entry, or invoice errors that slow down the payment cycle.
• When you have low processing costs, it’s a sign that your AP function is efficiently powered by automation, consistent workflows, and smart document handling. 

So why does it matter for accounts payable teams? Because efficient invoicing workflows don’t just save money, they strengthen supplier relationships, improve cash flow, and open the door to early payment discounts. 

What Drives Up the Cost to Process an Invoice?

If your AP costs feel high, they probably are, and there’s likely more than one cause for the spike. Your true invoice processing costs come from a mix of people, processes, and payment friction. For example, manual work slows things down, and disconnected systems create room for errors. Even minor inefficiencies add up quickly when you’re processing thousands of invoices each month.

Here are the biggest cost drivers that impact invoice processing, quietly draining time, money, and resources from your AP team.

Manual vs. Automated Invoice Processing

Removing the need for members of the AP team to manually involve themselves in the overall process is one of the most effective ways to reduce your annual costs. In fact, according to Ardent Partners, the average organization spends $9.87 to process a single invoice, with top performers reducing this cost to just $2.81 by implementing automated processes. 

Additionally, automating your accounts payable with the right technology increases the average number of invoices processed and, importantly, accuracy rates.

Invoice Volume and Complexity

Benchmarking data from APQC shows that the average number of invoices processed annually by organizations is 11,111 per full-time employee (FTE), with top performers reaching 20,000 per FTE. Without automation in place, manual errors can slow down processes and reduce your organization’s bottom line.

Labor and Training Expenses 

Labor remains the largest single expense in the cost per invoice. Training new staff and ongoing education around AP compliance add to these costs, emphasizing the need to standardize procedures and automate repetitive tasks to minimize manual involvement wherever possible.

Certain Payment Methods and Transaction Fees

The chosen payment method affects total payable costs. Checks typically incur higher costs and processing times compared to electronic invoicing payments. An understanding of the amount payable versus total payable, including transaction fees, helps businesses optimize payment strategies to reduce overall AP costs.

Fraud and Other Hidden Processing Fees

Beyond direct costs, indirect expenses like regulatory compliance management, error correction, and missed early payment discounts compound the processing cost, not to mention fraud. According to the Association for Financial Professionals, invoice manipulation was involved in 24% of all fraud cases reported in 2024.

These hidden processing fees must be accounted for when calculating the expected cost for an invoice and an estimate of true AP spending.

What Is the Cost of Processing an Invoice?

There’s no single answer to how much the average cost to process an invoice is, but there is a framework. AP teams need to account for both direct and indirect components.

• Direct costs include things like staff time, software subscriptions, and physical supplies (like paper, envelopes, and toner). These are the expenses you see on the books.
• Indirect costs are less visible but just as important, and often more damaging. Think late payment penalties, time spent fixing errors, missed early-payment discounts, or even fraud exposure. These hidden expenses and invoice fees can quietly inflate your cost-per-invoice without showing up as a clear line item.

A simple invoice processing cost formula might include:

• Total AP labor hours × hourly rate
• Cost of AP tools or software
• Rework time from invoice exceptions
• Late fees or missed discount estimates

That gives you a real-world number you can use to track performance and identify savings. Many teams use internal spreadsheets or invoice cost calculators to estimate this monthly and benchmark improvements over time. But implementing a more robust solution that leverages consistent, automated reporting can streamline the process and improve its accuracy.

6 Proven Strategies for Reducing Invoice Processing Cost​

Once you understand what’s inflating the cost to process an invoice in your enterprise, the next step is to eliminate those drivers without overhauling your entire operation. 

These six strategies are proven to cut the average cost to process an invoice in your organization by streamlining approvals, reducing errors, and making better use of your team and tools.

1. Digitize and Streamline Document Handling

Streamlining your invoice data capture eliminates paper-based bottlenecks and reduces time spent on manual sorting, scanning, and entry. Digital formats support automation and allow invoices to be captured, validated, and stored automatically. Digitizing speeds up processing, cuts down on errors, and improves audit readiness from the start.

2. Standardize and Simplify Invoice Approval Workflows

Routing invoices manually is a common source of delay and miscommunication. Automating sign-offs ensures consistency, accountability, and speed. Invoices move through standardized approval workflows that automatically route to the right people based on predefined rules, reducing backlogs and avoiding late payments. Standardization also improves visibility and compliance across departments.

3. Implement Advanced Invoice Matching

Two and three-way invoice matching reduces human oversight and error. Adopting an automated process helps you identify discrepancies early and ensures payments are only made for approved, received goods. Matching minimizes:

• Overpayments
• Fraud risk
• Payment delays
• Manual reconciliation time

4. Choose Efficient Payment Methods

Paper checks carry transaction fees, mailing costs, and long processing cycles. Shifting to ACH or electronic payments: 

• Lowers the AP cost per invoice 
• Shortens the payment window
• Improves cash flow predictability
• Offers stronger traceability

Suppliers benefit, too, as better decision making when it comes to managing reconciliation creates faster, more reliable payouts.

5. Ongoing Training for AP Staff

Training your AP team on tools, fraud prevention, and regulatory changes builds long-term savings. Staff who understand the systems they use can identify errors faster, reduce exception handling, and follow standardized workflows. 

Ongoing education around AP fraud and compliance also helps ensure consistency across locations and reduces onboarding time for new hires.

6. Continual Invoice Workflow Optimization

Process improvements don’t have to be dramatic; they just need to be consistent. High-performing AP teams regularly review KPIs like cost per invoice, exception rates, and approval time. By benchmarking results and adjusting workflows accordingly, they stay ahead of inefficiencies and make sure early gains turn into long-term savings.

How AP Automation Lowers AP Cost per Invoice

By eliminating manual steps of the invoice management process with automation and improving accuracy, teams cut time, reduce errors, and increase throughput, all without adding headcount. 

Automation directly impacts the invoice lifecycle by:

• Generating Fewer Exceptions and Errors: Automated validation catches errors early (like missing POs or mismatched totals) and flags them before they hold up processing. This approach cuts down on rework and reduces the risk of incorrect payments, reducing invoice processing cost​s.
• Minimizing Labor Costs: Invoice processing automation reduces time spent on repetitive tasks like data entry, filing, and chasing approvals. That means fewer full-time staff are needed to manage growing invoice volumes, and existing team members can focus on more strategic work.
• Processing More Documents with Less Effort: When AP runs through automated systems, teams can handle a higher volume of invoices without increasing overhead. That scale is what ultimately drives down your cost per invoice, giving you a model that grows with the business.
• Offering Better Visibility and Control: Modern AP automation software provides real-time tracking and centralized dashboards, helping finance teams monitor invoices at every stage. This visibility helps prevent holdups, reduces duplicate payments, and supports compliance efforts.

Reduce Your Overall AP Process Cost with ExFlow

If your AP team is still relying on manual processes or patchwork systems, you’re likely spending more per invoice than you need to, in terms of both time and money. Built in Microsoft Dynamics 365 Finance & Operations and Business Central, ExFlow helps reduce the cost of processing an invoice through full end-to-end automation, including:

• Touchless invoice capture, validation, and three-way matching to minimize manual data entry and reduce errors
• Automated approval workflows that work across devices and cut down on approval delays
• Built-in exception handling and tolerance controls to resolve discrepancies faster
• Real-time analytics and dashboards powered by Power BI for clear visibility into performance and cost trends
• Native D365 integration that reduces IT overhead and training costs while accelerating ROI

Ready to cut down your AP expenses? Book a demo today to see how ExFlow can help you optimize your invoice processing costs.