Organizations can reduce accounts payable costs by improving process clarity, strengthening controls, and standardizing how invoices are submitted and processed. Although accounts payable (AP) may not always be the first place finance leaders look for cost savings, benchmarking data shows that improving AP efficiency can produce meaningful financial benefits.
One useful way to evaluate efficiency is the total cost to perform the accounts payable process per $1,000 in revenue. This metric measures the full cost of running AP operations, including personnel, systems, overhead, outsourcing, and other operational expenses. By normalizing costs against revenue, organizations can compare their performance with peers and identify opportunities to operate more efficiently.
APQC benchmarking data shows a clear gap between high and low performers. Top-performing organizations spend about $0.38 per $1,000 in revenue to process accounts payable, while bottom performers spend about $0.92. For a company with $1 billion in annual revenue, this difference can represent more than $500,000 in potential annual savings.
For a deeper look at this metric and how organizations can benchmark performance, see APQC’s guidance on accounts payable benchmarking and the cost to process accounts payable per $1,000 in revenue.
Key Strategies to Reduce Accounts Payable Processing Costs
Reducing AP costs often requires organizations to focus on several improvement areas:
- Develop clear policies and procedures. Standardized processes for invoice submission, validation, and payment processing reduce confusion and minimize time spent resolving errors or inconsistencies.
- Strengthen invoice accuracy controls. Implement checks and balances that prevent duplicate invoices, incorrect billing information, and other common errors that create additional manual work for AP teams.
- Improve communication with vendors. Clearly communicate invoice submission requirements and standardize formats so suppliers know exactly how invoices should be submitted and what information is required.
These steps help reduce errors and rework, allowing AP teams to process invoices more efficiently. Many organizations also complement these improvements with automation tools that streamline invoice processing, improve visibility into invoice status, and reduce manual data entry.
By focusing on process clarity, stronger controls, and better vendor communication, organizations can significantly lower the cost of running their accounts payable function. Benchmarking metrics such as AP cost per $1,000 in revenue help finance leaders track performance and identify opportunities to build a more efficient and cost-effective AP operation.