Accounts payable invoice approval process
- What approval costs a month
- $4,300.80
- Computed on this page from the inputs below
- Hours on routine handling
- 120
- Computed on this page from the inputs below
- Hours on exceptions
- 14.4
- Computed on this page from the inputs below
- Total hours a month
- 134.4
- Computed on this page from the inputs below
Every figure on this page is computed from the inputs entered, by the method stated below it. Monthendly publishes no benchmark close time, no industry average DPO and no accounting standard: the tasks, the minutes, the rate and the exception rate are yours, and the defaults are a worked example to replace with your own figures.
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The figures above start from a worked example ($4,300.80). Change any input and the answer updates as you type.
Download the Accounts payable invoice approval process worked example (CSV)
Nobody sets out to build an expensive invoice approval process. It accretes: an extra check after something went wrong, a second approver for larger amounts, a chase when the first one is on leave. Each step was reasonable and the total has never been priced. This worksheet prices it. Put in how many supplier invoices you handle a month, how many times each one is touched, how long a touch takes, what share go wrong and how much longer those take, and the loaded hourly cost of the person doing it. It returns the hours a month, what that costs, the cost per invoice and the annual figure. That last number is the one to hold any software, any automation and any process change up against.
Count the touches, including the chases
400 invoices touched three times at six minutes is 120 hours a month. A touch is any time a person handles the invoice: opening it, coding it, chasing an approver, approving it, posting it. Teams routinely count two and discover four, and the chases are the ones nobody counts.
Exceptions are where the time actually goes
A 12% exception rate taking eighteen extra minutes adds 14.4 hours, making 134.4 in total. That is 11% of the effort coming from 12% of the invoices, and it is the part automation helps least, because an exception is a judgement rather than a step.
The annual figure is the one to negotiate against
134.4 hours at a $32 loaded rate is $4,300.80 a month, $10.75 an invoice and $51,609.60 a year. Whatever you are quoted for software, the honest comparison is against that, and against what the route would cost with fewer touches rather than with none.
Accounts payable invoice approval process: common questions
What is a loaded hourly cost? Salary plus employer costs divided by working hours: what an hour of that person actually costs the business, not what lands in their bank account. Using the salary alone understates the process by roughly a third in most places, which is your figure to work out rather than ours.
Does the cost per invoice mean anything on its own? Only against your own baseline. It is useful for tracking a change you make and for comparing quotes, and it is misleading against somebody else's published figure, because their touches, rate and exception mix are not yours.
Will automation remove all of this? No, and a vendor promising it is selling the happy path. Capture and matching remove touches on the invoices that behave; the exceptions still need a person, and on the worked example they are already 14.4 of the 134.4 hours.