Posted by Sam Hassan on 02/03/2017
Invoicing isn’t free; manual labour and associated overheads can make it a costly process, especially if you are still sending paper invoices.
True, e-Invoicing – sending and receiving invoices directly from your Accounting software – is one solution you might look at. But just how much of a difference could it really make to your invoicing expenses?
Try applying the 4-step example below to your business operations to get a rough estimate on the amount you could save with e-Invoicing.
Invoice Expense Calculation
How many staff hours does it take per month to create invoices?
Let’s assume you have 4 people in your team – Jan, Peter, Bruce & Warren – who create invoices. Together they spend 31 hours per month specifically on invoicing activity.
What do those hours cost the company in salary?
Jan spends 10 hrs a month on invoicing, her annual salary is $50,000.
Peter; 8 hrs a month with a salary of $75,000.
Bruce; 8 hrs a month with a salary of $95,000.
Warren; 5 hrs a month with a salary of $40,000.
Divide each salary by 2000( The average amount of hours a full-time employee works per year) to get an average hourly salary. In our example, it’s $25, $37.50, $47.50 and $20 per hour.
Multiply these salaries by time devoted to invoicing to determine the monthly expense (10 X $25 + 8 X $37.50 + 8 X $47.50 + 5 X $20 = $1,030)
$1,030 per month for a 4-person team.
What do those hours cost the company in overhead and benefits?
Multiply the figure above by your company’s standard overhead calculation – your Accountant will know this number if you do not, it’s typically 40% – 50%.
We’ll use 45%. So the overhead cost of invoicing labour is $463 ($1,030 X 45%).
The total labour cost for invoicing per month is now $1,493 ($1,030 + $463) – and we haven’t even taken into Account managerial costs, printing costs, office space (for people and equipment), maintenance, disputes, etc.
Determine the savings
The costs really add up, don’t they? That’s why true e-Invoicing is becoming the new standard. It removes all the manual steps and helps you cut costs on your invoice processing.
Once you’re done working out your normal invoicing expenses, you can use this ROI calculator available here to compare and find out how much you can save with a fully automated e-Invoicing system such as Link4.