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Purchasing process cost
Invoice processing cost calculator
Enter your invoice volume, the minutes spent on each step, the share of invoices with problems and your hourly cost. You get the cost per invoice and the yearly bill.
The cost per invoice is the handling time for a normal invoice, plus the extra time on exceptions, multiplied by the hourly rate, plus payment cost. At the default numbers one invoice costs USD 11.90.
Written by Procurement VMS Editorial Team · Reviewed by Michael, Procurement Advisor Expert · Updated
Your numbers
The boxes start with an example so you can see how it works. Replace them with your own figures.
Your result
Each invoice costs USD 11.90 to process, or USD 285,600 across 24,000 invoices. Exceptions account for 20% of that cost.
| Handling time for a clean invoice | 15 minutes |
|---|---|
| Average extra time from exceptions | 4.5 minutes |
| Cost per invoice | USD 11.90 |
| Yearly cost of invoice processing | USD 285,600 |
| Share of cost caused by exceptions | 20% |
The currency box changes the label only. Enter amounts in the currency you choose.
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How the invoice processing cost calculator works
The formula
Cost per invoice = ((handling minutes + exception rate x exception minutes) / 60 x hourly cost) + payment cost.
The cost of an invoice is mostly people. Entry, matching and approval take a few minutes each, and the exceptions take far longer. A small share of problem invoices can carry a surprising share of the cost.
Knowing the cost per invoice gives you a basis to judge automation, e-invoicing and supplier portals. It also shows when to push suppliers to send clean invoices that match the order.
The example numbers are illustrative and are not benchmarks. Use your own data for any decision.
How to use it with your own data
- Sample 20 invoices and time the three steps, then note how many needed extra work.
- Use a loaded hourly cost from finance.
- Check which exceptions repeat, since each cause fixed removes that cost on every future invoice.
Mistakes that skew the answer
Ignoring exceptions
Averages that leave them out understate the cost and hide the best place to save.
Using headcount instead of time
If staff also do other work, count only the minutes spent on invoices.
Forgetting late payment effects
Slow processing can mean lost early payment discounts or late fees.
What to do with the result
Pair the figure with the three-way match guide to reduce exceptions, and test automation with the procurement ROI calculator. For the order side of the process, use the cost per purchase order calculator.
Questions about the invoice processing cost calculator
How much does it cost to process an invoice?
The cost varies widely with how much is manual. Calculate your own by timing the steps and adding the cost of exceptions.
What is an invoice exception?
An invoice that does not match the order or the receipt, or is missing information, so it needs manual work to resolve.
How do I reduce invoice cost?
Match automatically, prevent exceptions at the source, use electronic invoicing and approve in a workflow instead of by email.
Should I include the cost of payment?
Yes. Bank fees and cheque costs add to the cost of each invoice, even if small.