Automated Systems, Inc.
Automated Systems, Inc.
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What are all the steps that your company goes through to pay a freight bill? In the April 1996 issue of Controller Magazine, in "Cutting the Fat from Accounts Payable", authors Tad Leahy and Ivy McLemore report: "Typically, the accounts payable process represents the greatest opportunity for improvement in the accounting function... The stakes are high: The average company processes 190,000 vendor invoices per $1 billion of revenue, pays each employee $36,705 per year in salary and benefits ..." In this same article, Leahy and McLemore interviewed Mark Krueger, Vice President of The Hackett Group, a consulting firm in Hudson, Ohio. According to Krueger, "The average company ... processes 11,100 invoices per person per year." The math for direct labor cost for payables processing is: $36,705/11,100 = $3.31/invoice. Direct labor usually represents 30% of fully allocated payables costs when indirect labor, equipment, postage, supplies, administration, overhead and other cost components are considered. Applying this 30% factor to the $3.31 direct labor cost above, yields a fully allocated average payables cost of $11.03 per invoice. The IOMA's (Institute of Management and Administration) "Managing Accounts Payable" (MAP) publication of May 1997 validates the previous article. MAP notes: "On average, it costs an accounts payable department $10.55 to process a vendor payment ... In summary, your cost to pay an invoice is probably $10.50 - $11.00. |
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