In India, businesses are scaling up quickly. This necessitates that businesses closely monitor their expenses. Most of the businesses overlook the cost per invoice. Cost per invoice is the total amount that a business uses to process an invoice, i.e., the cost incurred from the moment it is generated until the time when the payment is received. This plays an integral role, as when businesses cut down on the costs related to the invoicing, it saves a lot of money that is beneficial to run in the long run for any business.
What is Cost Per Invoice?
The cost per invoice is the total cost involved in processing a single invoice. But it is not only related to the paper and postage. Instead of that, it covers a lot more than this. Companies that hold a high number of invoices and are usually involved in sectors like manufacturing, retail, and services can save a lot of funds by reducing this cost. In India, people mostly rely on manual invoicing for both small and medium-sized businesses, but that brings more cost to any business.
How to Calculate Cost Per Invoice?
To calculate cost per invoice, you first need to gather up all the expenses tied to your invoicing process. The formula is simple:
Cost per Invoice = Total Invoice Processing Costs ÷ Number of Invoices Processed
Here’s what’s typically included in total invoice processing costs:
Labor Costs: This covers the salaries of the employees who process invoices.
Technology Costs: This is for any software or systems you use to create, send, or track invoices.
Paper & Printing: If you’re still using physical invoices, add the cost of paper, ink, and postage here.
Error Correction: If there are mistakes in the invoicing process, you’ll need to factor in the time and cost spent fixing those errors.
For example, if a business spends ₹40,000 on labor, ₹8,000 on technology, and ₹5,000 on paper and postage to process 500 invoices, their total cost is ₹53,000. Divide that by 500, and the cost per invoice is ₹106.
What is the Charge Per Invoice?
The charge per invoice is the direct cost that might need to be paid to process an invoice. The fees for using the invoicing software may be included. You may incur payment processing charges or outsource the task to a third party.
If we compare automated systems with the manual process, then the charge per invoice is low. That is why nowadays people are more inclined towards automated systems. Also, automated systems are useful to reduce human errors, labor, and time, which results in more savings for a business.
What is the Cost of Invoicing?
The cost of invoicing is the entire expense involved in processing invoices. This includes every cost that pops up during the invoicing process, whether you’re using a manual system or an automated one. In India, the cost of invoicing can range widely depending on whether you’re still stuck with paper invoices or have moved to a digital platform.
Businesses that rely heavily on manual invoicing typically face higher costs due to the need for physical materials (paper, ink, postage) and the time employees spend handling each invoice. If a mistake is made, the cost can rise even further because someone will need to go back and fix it.
Example of Cost Per Invoice
Let’s take a real-life cost per invoice example to bring this home.
A small business in India processes 500 invoices a month. Here’s a breakdown of their costs:
Labor: ₹40,000
Technology: ₹8,000 (software license)
Paper & Printing: ₹5,000
Error Handling: ₹2,000
Total cost = ₹55,000
Now, divide that by the number of invoices (500):
Cost per invoice = ₹55,000 ÷ 500 = ₹110
If this business shifts to automation, their labor costs could drop by at least 50%, bringing the cost per invoice down to around ₹40. That’s a huge difference when you’re processing thousands of invoices every year.
Reducing Your Cost Per Invoice
Reducing your cost of invoicing is easier if you know where to look. One of the quickest ways to lower your costs is to automate the invoicing process. Automation cuts down on labor costs, reduces the chance of errors, and speeds up the entire payment cycle.
In India, many businesses have already started shifting towards e-invoicing systems that comply with GST requirements. These systems allow you to generate, send, and track invoices electronically, which slashes costs tied to paper, printing, and error correction.
Another way to reduce costs is outsourcing. Many companies outsource their invoicing tasks to third-party services that handle everything from invoice creation to payment tracking. This might involve a small fee per invoice, but it can still be much cheaper than doing it all manually in-house.
Questions to Understand your ability
Que.1 What does Cost Per Invoice actually mean?
A) Just the cost of paper and postage.
B) The total expense to process one invoice, including labor, software, and fixing errors.
C) A random fee businesses pay to send out invoices.
D) Only the cost of using an invoicing software.
Que.2 What’s the formula to figure out Cost Per Invoice?
A) Total processing costs divided by total sales.
B) Total number of employees divided by invoices processed.
C) Total invoice processing costs divided by number of invoices processed.
D) Labor costs divided by the number of invoices sent.
Que.3 Which of these doesn’t count in the total cost of processing an invoice?
A) Labor expenses.
B) Software costs.
C) Paper and postage.
D) Advertising costs.
Que.4 What’s one quick way for Indian businesses to cut down their Cost Per Invoice?
A) Stick to manual invoice processing.
B) Automate invoicing to save on labor and fix fewer mistakes.
C) Hire more people to handle invoices.
D) Use more paper invoices.
Que.5 A business spends ₹55,000 to process 500 invoices. What’s their Cost Per Invoice?
A) ₹110
B) ₹50
C) ₹55
D) ₹106
Conclusion
To improve the overall efficiency of any business, understanding the cost per invoice and cutting down on these costs is the key. Via automation processes, businesses used to reduce their invoicing costs. So, businesses need to stop wasting money on the outdated invoicing processes and welcome the automated systems so that the business runs more efficiently.
FAQ's
Cost per invoice is the total amount a company spends to process one invoice. It’s not just paper and postage. It includes everything—employee time, software, fixing mistakes, the whole deal. It’s the complete cost from start to finish.
Because if your invoicing costs are high, you’re just throwing money away. Especially in industries with tons of invoices like manufacturing or retail. The more you can cut down on invoicing costs, the more cash you save for actual business growth.
It’s pretty straightforward.
Cost Per Invoice = Total Invoice Processing Costs ÷ Number of Invoices Processed
You take all the money you spend on invoicing (labor, tech, printing, etc.) and divide it by how many invoices you process.
You’ve got your labor costs (people who handle invoices), your tech (software and systems), and if you’re still stuck with paper invoices, you’ve got paper, ink, and postage. Then, if there are mistakes, you’re paying someone to fix those too.
It’s basically the fee you pay to process an invoice. If you’re using invoicing software, that’s part of it. If you’re outsourcing invoicing to someone else, they charge you per invoice.
Because with automation, you don’t need as many people involved, and there’s less chance of messing up. It cuts down on labor, avoids errors, and speeds up everything. That’s why it ends up cheaper.
Manual invoicing is old-school and costs more—paper, printing, mailing, plus all the time someone spends handling each invoice. Automated systems, on the other hand, get rid of the paper, cut down on time, and fix mistakes faster, so it’s way cheaper.
The fastest way is to automate. Automation slashes labor costs, cuts out errors, and speeds up payments. Another option is outsourcing your invoicing to a third-party company. Sure, there’s a fee, but it’s still cheaper than doing it manually.
