Adopting business process automation (BPA) is an overwhelming endeavour, both financially and psychologically. At first, adopting BPA might appear intimidating, but once familiarized, its benefits become obvious.
Implementing BPA requires not only financial investment but also changes to operations, new software skills acquisition and employee education on new protocols. A compelling business case must be provided that justifies this degree of disruption.
Automation ROI calculation is of critical importance. Determining its return on investment (ROI) helps businesses quickly determine whether workflow automation is worth their while as an investment. With our ROI calculator, this process becomes much simpler.
How To Calculate Workflow Automation ROI?
Process automation Return On Investment calculations are far simpler than most people realize.
Continue reading to gain an understanding of how to first calculate ROI manually before turning to the Workflow ROI Calculator for assistance in automating ROI calculation.
Determine Your Annual Workflow Cost Now
Before automating, you must assess the duration of each manual operation so as to calculate the return on investment accurately. This involves time tracking for every process step, which requires manual labor in order to calculate ROI.
Once you know this baseline timeframe for each business process, sit with those responsible and go through each one with them to establish how many minutes it usually takes them to carry it out. By knowing this number of minutes, you can calculate staff wages accordingly.
Always ensure each employee in your workflow's pay grade has been fully loaded to cover benefits, vacation time and taxes - this calculation looks like this:
Current annual workflow cost = time (how long each step of the process takes) multiplied by employee hourly costs multiplied by the frequency of performance of monthly workflow x 12 (months).
Calculate Time Savings
You can estimate how automation will reduce time spent on repetitive workflow tasks once you have established a benchmark. Based on the decrease of required processing time for each employee process, then, cost savings calculations may be calculated for them individually.
Use the same formula used in step one to calculate the cost of automating your workflow using automation technology. Don't forget to factor in any expenses associated with buying and setting up the programme as well as any training costs related to staff learning how to use new automation technology.
Your calculation could look something like this:
Current Annual Workflow Cost = time (how long each step in the process takes) x cost (employee hourly cost) x frequency of use (12 monthly visits, for example) + total software and implementation costs.
Compare Differences
Calculating cost savings through intelligent automation requires subtracting annual costs associated with automation from current manual workflow costs.
Thus, you have saved an amount equivalent to $3,000. Furthermore, suppose your new procedures, including deployment, only cost $7,000 annually compared to their manual counterparts, which cost $10,000 annually to implement and execute. In that case, that means you have saved even more - that equals an annual savings of $10,000.
Keep in mind, however, that although automation software costs might be spread over multiple years, setup expenses typically only need to be included once. Therefore, your long-term cost calculations don't need to account for these.
When calculating the total cost of automated operations over time, one should include expenses associated with training new hires or employees annually.
Calculate Your Return On Investment
Divide the net savings you realize against the total cost of investing (including software price and implementation) to arrive at an ROI calculation, then divide by 100 for an approximate percentage return rate.
ROI Calculator tool automatically determines your monthly savings and the length of time it will take for you to recoup your investment automatically.
Compile Everything
Now that you understand how to calculate ROI for a single workflow, you may estimate ROI estimates for new workflows or use this approach for existing ones.
Add up all of the subtotals for intelligent process automation projects annually to determine their time and money savings; doing so makes securing approval much simpler for future automation projects.
ROI's significance in process automation:
ROI can serve as an accurate gauge of the financial viability of an initial investment, by showing its immediate advantages such as lower costs, increased output and decreased errors. It also takes into account any long-term benefits such as:
- Long-term cost reduction;
2. Enhanced operational effectiveness;
3 The capacity to expand operations without increasing expenses proportionately
Calculate the Return On Investment (ROI) of business process automation to assess whether it adds value, as well as to support any decisions to use it.
Also Read: Elevate ROI: How To Choose An Automated Workflow Worth $3.5M+?
Assess Your Workflow Success
Figuring out whether or not your process improvements achieved through automation have had the desired effects is the key to calculating a return on investment for an automation system.
When it comes to evaluating an automation solution's success, two forms of return should be taken into account: soft and hard ROI.
Soft ROI
This term refers to outcomes and working conditions changes that are harder to measure due to being harder to pin down with precise figures. Soft returns often focus on sensory evaluation of how participants of a process feel about its workings.
Soft ROI measures typically include increased customer happiness, enhanced morale and teamwork. Some examples of soft ROI measures are:
- Improving brand reputation
- Expanded accountability visibility transparency (AVT),
- Improved cooperation within teams
- Tighter policy compliance
- Improved company culture morale
- Contented clients
- Increased staff members
- Strengthened relationships with suppliers
You could use tools such as surveys or net promoter scores to assess these returns, though you cannot be certain whether the gains can be directly attributed to your new automation technology. Still, statistical testing might produce quantitative data. At the same time, correlation does not always imply causality.
Hard ROI
As hard ROI measures include tangible aspects such as time and cost savings that can be measured objectively, it is easier to compute. Some hard ROI measurements could include:
- Time saved per request or assignment
- Process cost reductions
- Workflow completion rate
- Approve/reject workflow rate
- Costs associated with running an office (printing, paper, maintenance and storage)
- Labour reduction, such as data entry positions.
- Fraudulent activity-related costs
- Output and productivity
- Corrective expenses for errors or delays.
- Financial Benefits of Early Discounts
Workflow automation is designed to enhance operational efficiencies for greater efficiency, meaning fewer resources are necessary to complete tasks at hand. This equates to savings on cost.
Automated procedures should be less costly and time-consuming, saving both money and resources in terms of staff time and costs required to correct errors manually and complete tedious manual activities. Improved accuracy and decreased data entry help achieve these time and cost benefits.
Of course, there's always the possibility that you could save even more on things such as early invoice payment discounts and paper and printing expenses; plus, reducing opportunity costs due to delays may bring additional savings, which aren't included in these calculations for simplicity's sake.
Conclusion
Measuring the return on investment (ROI) of your workflow processes is critical for business and organizational operations; however, not every ROI calculation will be straightforward. Tracking soft ROI is just as essential, though it may require more time and work. Commit to conducting research that provides insights on staff and customer wellbeing so you can incorporate soft ROI indicators into your analysis, then consider these insights along with concrete ROI data.
