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Reducing Operating Costs in a Slowing Economy

Published on:  
December 15, 2022

The current global economic conditions are forcing organizations to look for ways to reduce their operation costs. One area often overlooked is AP invoice automation. AP departments are generally cost centers of the business, but with the correct invoice automation solution, they can become a profit center.

Operating costs are the ongoing costs associated with running a business on a day-to-day basis. These costs include rent, utilities, employee salaries, and more. AP Invoice automation software is one such solution that can help companies save money by streamlining the AP invoice software and improving efficiencies.

There are several ways businesses can reduce operating costs, and the best approach will vary depending on the specific industry and business model. However, some common strategies include automating processes, negotiating with suppliers, and reducing energy consumption.

Inside this blog

Therefore, businesses embrace AP invoice processing to increase productivity, reduce errors, and lower costs. Lowering costs allows you to operate with less cash, and the company can collect accounts receivable balances for cash flow purposes.  

For example, by automating invoice processing, companies can reduce the number of invoices sent to collections, late payments, duplicate payments, and human errors.

In addition, invoice automation software solutions can provide visibility into spending, which can help organizations negotiate better deals with their suppliers.

It is important to note that manual AP processes contribute to rising operating costs.

Here is why: AP staff may process hundreds or thousands of transactions per month, and AP processing affects invoice coders, approvers, and company vendors.

Here are some examples of everyday tasks that can be fully automated to reduce operating costs and time:

• Invoices: Receiving invoices in hardcopy via mail or as attachments to emails sent to multiple recipients and paper invoices costs money to the operations.

• Invoice processing: Following the approval of the paper invoice, the paperwork is sent to accounting so the payment can be processed. Processing paper invoices is both costly and time taking.

• Follow up on exceptions: If there is a question about invoice approval, the AP staff will call or email company staff to get clarification, which is time-consuming.

The organization needs a central location where business owners can review invoices and supporting documents. Therefore, high costs are involved in using manual invoices. This manual system causes approvals to take longer, records to be lost, and poor communication between stakeholders. As a result, the AP team needs to keep track of the total number of outstanding invoices, the total dollar amount, and the due dates.

Here's how you can reduce operating costs in your business:

1) Examine and modify your annual budget

Start by compiling a thorough financial report. A financial statement can find any budget leaks by establishing the baseline of your income and expenses. Reduce operating costs more easily once you've determined where your spending is high. Create a map of potential worst-case scenarios so you know all the options. Consider the market's state if you need to change your annual budget. Keep a close eye on market trends and assess any potential long-term effects.

2) Reduce spending and revise your framework for benefits and perks

Make a thorough examination of all costs to determine their source. It will help if you know which expenses to cut and which to eliminate.

One of the most important things to consider cutting back on is employee benefits. Look at your system for employee perks and benefits and devise a way to cut costs without affecting employee morale.

Companies should conduct surveys to decide which benefits to keep, postpone, or eliminate. Although cutting or eliminating these benefits during a recession may seem risky, given that they are essential performance drivers, employees often prioritize job security. Please ensure they are part of the decision-making process and feel in control of these changes.

3) To ensure ongoing business operations, prepare cash flow projections

Create your cash flow forecast, considering all upcoming and anticipated accounts payable and receivable. For managing cash flow, businesses should have an effective invoicing system. It is the perfect time to fine-tune your invoicing system if you've ever had issues getting behind on your invoices.

4) Shorten the time it takes to convert money

Identify your upcoming accounts payable (AP) and accounts receivable (AR), and then you can begin improving your working capital. Request vendors to push invoices without penalty, not break up payments in smaller chunks, and use discounts to entice customers to pay in advance. Also, you can increase your cash flow by taking advantage of Venture Debt, SBA Relief Loans, and vendor discounts or offers.


There are several ways to reduce the operating costs of AP invoice processing systems in a slowing economy. The most important thing is to be aware of the potential for cost savings and to take action to implement those savings. This blog has outlined a few of the most effective cost-reduction strategies. We hope you find them helpful and that you share them with others who may be facing similar challenges.

Hermes – AP automation is an AP invoice software that helps organizations to reduce their AP operating costs, reduce working hours, eliminate duplicates, produce error-free outputs, and improve the quality of deliverables.

Contact us today to learn more about how your organization can save money by implementing an AP invoice automation solution.

Hermes Account Payable Automation

Mohan Krishna

Go-to expert on financial engineering, Compliance management, and financial solutions.

Mr. Mohan is the Vice President of Finance at Calpion Inc. He brings over two decades of experience in financial solutions, compliance, taxation, and funding.

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