Cost To Pay a Utility Bill

What does it cost to pay an invoice? Cost per transaction can represent an important KPI. When attempting to quantify the true cost of utility bill payment, you need to consider the following six categories:

  • Direct Labor Costs (employee fully burdened salary) 
  • Indirect Labor Costs (IT support, turnover ratios)
  • Equipment Costs
  • Postage and Supplies Costs (don’t forget bank charges)
  • Administrative and Overhead Costs (allocate overhead by employee, HR costs, etc.)
  • Other Costs

IOMA, the Institute of Management and Administration, publishes a leading AP benchmarking study. Its 2010 study shows the median cost to pay an invoice is $6.24, with an average of $11.63. Highly automated AP departments experienced a median cost of $5.78 per bill.*

But what do those general statistics really tell you? Does the cost of $11.63 per invoice include the development and maintenance of an extensive data mart and reporting engine? Can your business analysts develop cost-saving strategies and mine the data for further process improvement? Does that cost include separate systems with appropriate business logic to manage energy costs? What if your cost was only 10 cents per invoice, but you had no reliable data or business intelligence tools to use in analyzing your costs? Is it worth it?

Lifecycle Rather Than Event

The narrow focus given to the transactional “event” of processing an invoice has broadened to include a wider view of the continuous, business process “lifecycle.” Managers recognize the value chain that begins with sourcing, ends with business analytics, but starts over again with sourcing. In other words, buyers can “use what they know” from the utility bill payment process to make better energy sourcing decisions. Data-driven expense management has taught the enterprise the value of information. Business analysts and business process managers pore over the data to develop new cost-saving and energy-saving strategies.

Virtually every enterprise puts significant value on managing energy and telecom costs, but in some organizations the value is higher than others. In multi-site organizations, the value of analyzing energy and other facilities costs is high, making this a strategic spending category.

Each high-value business process must be handled uniquely, with software that accommodates specific functionality and business rules. Today the process will likely include: verification/audit of the charge, harvesting the invoice data, building a data warehouse for purposes of expense analytics and automated allocation of charges to cost centers.

The most useful metrics are those that allow you to compare all process inputs, outputs and costs for the same business process. If you are evaluating companies to provide utility cost management, you should conduct a competitive bid allows you to compare value for value. You can then compare your current process outputs (such as reporting and analysis tools) with what is available through Cass.

For help in comparing costs of your existing process with the cost of Cass services, please contact us.

*This content was originally published in IOMA's research report 'AP Department Benchmarks & Analysis 2010' and is republished here with the express written permission of IOMA. Copyright © 2011