The Cost of Getting Paid


As a business owner one of your biggest expenses is the process of getting paid.  Think about everything involved in sending out bills:

  • Paper
  • Printer hardware cost (lease or purchase)
  • Printer maintenance
  • Ink
  • Postage
  • Staff time spent on printing, stuffing, and sealing envelopes

And that’s just to get the bills out the door.  A company will pay approximately $0.55 to print and mail each bill sent out – that is before adding in the labor expense.  Research suggests that an average employee can fold invoices and stuff them into envelopes at the rate of 190 envelopes per hour.  If you have a fully-loaded, grossed-up wage of $20/hour, the cost of folding adds another $0.15 to each bill.

On the collections side once the bill is paid, your costs go up significantly.  The payment envelope has to be opened, the payment has to be posted to your general ledger, a deposit ticket needs to be prepared, and then the check(s) need to get to the bank.  This entire process can cost anywhere from $0.50 to $1.50 per bill.

In total, payment processing costs you $1.10-$2.20 per invoice if it does not involve dispute resolution.  If you send out 200 bills per month, you are spending close close to $6,000 per year just to get paid.  You obviously can’t do away with billing but it would be smart to really look at your current processes.  Is there a better way?  Would a lockbox at your bank make sense?  Should you invest in a desktop scanner to make your bank deposits from your office?  Can your clients pay you electronically or can you debit their account directly to get paid?  I suspect there is at least one item in the process that you can change immediately to cut costs or increase efficiency and I am challenging you to stop and think about it to see what you can come up with.

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