The Digitalist Team
April 20, 2022

Workflow Automation ROI

ROI is always a priority for managers and executives when researching and implementing workflow automation software. Whether the selected software is a pay-per-use or pay-per-seat structure, they want to be sure that investing time and money in these new practices will benefit the business and not a placebo.

Beyond the required capital investment, integrating workflow automation means changing the way your organization or team operates, learning to use new software, and training employees to follow new business processes. To make a solid business case for this level of disruption, you need hard numbers.

Therefore, it is essential to calculate the ROI of automation. Understanding your return on investment makes it easy to decide if your investment in workflow automation is worth it.

How do you measure the ROI of workflow automation?

Instead of reviewing the entire automation process to make more money or save an existing budget, an ideal way to manage it is to understand its impact on the workflow. Calculating the ROI of your automation technology depends on measuring whether the process improvement you’ve made (or planning to make) has (or will have) the intended effect or not.

But where to start? Simple: calculate and compare productivity and savings metrics.

Step 1: Create a Baseline

Before deploying the workflow automation tool across your company, identify and list all the unproductive tasks you want to automate. Analyze each of those tasks with your employees and calculate the average number of hours required to complete each task and the estimated cost of the related working hours.

By creating a benchmark for current productivity, you can easily compare data before and after implementation. This homework will save you most of the hassle when it’s time to report and provide a helpful reference for future optimization.

Step 2: Calculate Hard ROI

With implementation done and initial data collected, it’s time to pick up the calculator and do the math. ROI metrics like time and cost savings are the first criteria you should measure as they are simple calculations providing solid proof of your workflow automation software efficiency. Since hard ROI is quantifiable, its calculation is relatively easy as it deals with variables that you can objectively measure.

Hard ROI metrics might include:

  • Time saved per task/request
  • Overall process cost savings
  • Rate of workflow completion
  • Rate of workflow approval/rejection
  • Office operational costs (printing, paper, maintenance, storage)
  • Labor costs (e.g., reduction of data entry roles)
  • Time spent on correcting errors
  • Remedial costs related to errors and delays

The main goal of workflow automation is to streamline business processes to make them more efficient. This means fewer resources to use for doing the same amount of work. In this sense, automated processes take less time and lower costs. Increased accuracy and reduced data entry reduce the time and personnel required to correct errors and perform routine manual tasks.

Of course, you can save extra in areas like paper and printing costs and early invoice payment discounts. In addition, there are fewer tangible savings gained by avoiding the opportunity costs of delays.

How to Calculate Hard ROI

The ROI calculation process is far more straightforward than you might think. Here is a practical guide on how to do it:

1. Calculate Your Current Annual Workflow Cost

The calculation looks like this: Current annual workflow cost = Time (how long each step of the process takes) x Cost (employee cost per hour) x Frequency (how often the workflow is performed monthly) x 12 (months).

2. Determine Time Savings

Annual automated workflow cost = Time (how long each step of the process takes) x Cost (employee cost per hour) x Frequency (how often the workflow is performed monthly) x 12 (months) + Total software and implementation costs.

3. Calculate the Difference

Annual workflow automation savings = Current annual cost - Annual automated workflow cost

4. Calculate Your ROI

Annual workflow automation ROI = (Current annual cost - Annual automated workflow cost) x 100 / Cost of automation

Step 3: Measure Soft ROI

Every business knows that investing more in lead generation and customer retention is the first step to building a large user base. A motivated staff can contribute in many ways, not only reducing costs but also helping to boost morale through a transparent workflow.

When generating ROI reports, never forget about soft costs and savings. These indicators are more intangible and harder to quantify because they are not empirical, and the data can be correlated with other operational changes. However, it is still crucial to note and measure these data to overview your automation tool’s performance.

Soft ROIs refer to improvements in working conditions and outcomes. This feedback is often experiential and involves what the stakeholders in the process think about the operation and its performance. Soft ROI metrics range from improved team collaboration to higher morale and customer satisfaction.

Soft ROI metrics might include:

  • Improved brand reputation
  • Improved operational visibility and transparency
  • Increased employee accountability
  • Better team collaboration
  • Increase in remote employee efficiency
  • Closer adherence to policies and legislation
  • Improvements in employee satisfaction and morale
  • Happier customers
  • Better supplier relationships
  • Decrease in completion times (and the number of bottlenecks)
  • Decrease in operational risk

Consider measuring these returns using tools such as surveys and net promoter scores. While this type of research can yield quantifiable data, you can’t be sure that these improvements are directly related to the new automation tool. It may be tempting to make this association, but the correlation is not equal to causation.

Step 4: Analyze

After calculating the hard and soft ROI, you need to analyze the data to see gaps in your automation implementation program. Were employees happy with the software initially, but morale plummets after the third month despite falling costs and increasing time savings? Perhaps a training program could improve their confidence? Numbers can speak volumes and will be invaluable in supporting your long-term optimization.

Conclusion

Saying goodbye to legacy processes and diving into uncharted waters can be scary. But as you see the returns of automating time-consuming, paper-based processes, you will be glad you’ve made the switch. Boosted working processes help extract high-quality work from the existing workforce, contributing to business growth in multiple ways.

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April 20, 2022

Workflow Automation ROI

ROI is always a priority for managers and executives when researching and implementing workflow automation software. Whether the selected software is a pay-per-use or pay-per-seat structure, they want to be sure that investing time and money in these new practices will benefit the business and not a placebo.

Beyond the required capital investment, integrating workflow automation means changing the way your organization or team operates, learning to use new software, and training employees to follow new business processes. To make a solid business case for this level of disruption, you need hard numbers.

Therefore, it is essential to calculate the ROI of automation. Understanding your return on investment makes it easy to decide if your investment in workflow automation is worth it.

How do you measure the ROI of workflow automation?

Instead of reviewing the entire automation process to make more money or save an existing budget, an ideal way to manage it is to understand its impact on the workflow. Calculating the ROI of your automation technology depends on measuring whether the process improvement you’ve made (or planning to make) has (or will have) the intended effect or not.

But where to start? Simple: calculate and compare productivity and savings metrics.

Step 1: Create a Baseline

Before deploying the workflow automation tool across your company, identify and list all the unproductive tasks you want to automate. Analyze each of those tasks with your employees and calculate the average number of hours required to complete each task and the estimated cost of the related working hours.

By creating a benchmark for current productivity, you can easily compare data before and after implementation. This homework will save you most of the hassle when it’s time to report and provide a helpful reference for future optimization.

Step 2: Calculate Hard ROI

With implementation done and initial data collected, it’s time to pick up the calculator and do the math. ROI metrics like time and cost savings are the first criteria you should measure as they are simple calculations providing solid proof of your workflow automation software efficiency. Since hard ROI is quantifiable, its calculation is relatively easy as it deals with variables that you can objectively measure.

Hard ROI metrics might include:

  • Time saved per task/request
  • Overall process cost savings
  • Rate of workflow completion
  • Rate of workflow approval/rejection
  • Office operational costs (printing, paper, maintenance, storage)
  • Labor costs (e.g., reduction of data entry roles)
  • Time spent on correcting errors
  • Remedial costs related to errors and delays

The main goal of workflow automation is to streamline business processes to make them more efficient. This means fewer resources to use for doing the same amount of work. In this sense, automated processes take less time and lower costs. Increased accuracy and reduced data entry reduce the time and personnel required to correct errors and perform routine manual tasks.

Of course, you can save extra in areas like paper and printing costs and early invoice payment discounts. In addition, there are fewer tangible savings gained by avoiding the opportunity costs of delays.

How to Calculate Hard ROI

The ROI calculation process is far more straightforward than you might think. Here is a practical guide on how to do it:

1. Calculate Your Current Annual Workflow Cost

The calculation looks like this: Current annual workflow cost = Time (how long each step of the process takes) x Cost (employee cost per hour) x Frequency (how often the workflow is performed monthly) x 12 (months).

2. Determine Time Savings

Annual automated workflow cost = Time (how long each step of the process takes) x Cost (employee cost per hour) x Frequency (how often the workflow is performed monthly) x 12 (months) + Total software and implementation costs.

3. Calculate the Difference

Annual workflow automation savings = Current annual cost - Annual automated workflow cost

4. Calculate Your ROI

Annual workflow automation ROI = (Current annual cost - Annual automated workflow cost) x 100 / Cost of automation

Step 3: Measure Soft ROI

Every business knows that investing more in lead generation and customer retention is the first step to building a large user base. A motivated staff can contribute in many ways, not only reducing costs but also helping to boost morale through a transparent workflow.

When generating ROI reports, never forget about soft costs and savings. These indicators are more intangible and harder to quantify because they are not empirical, and the data can be correlated with other operational changes. However, it is still crucial to note and measure these data to overview your automation tool’s performance.

Soft ROIs refer to improvements in working conditions and outcomes. This feedback is often experiential and involves what the stakeholders in the process think about the operation and its performance. Soft ROI metrics range from improved team collaboration to higher morale and customer satisfaction.

Soft ROI metrics might include:

  • Improved brand reputation
  • Improved operational visibility and transparency
  • Increased employee accountability
  • Better team collaboration
  • Increase in remote employee efficiency
  • Closer adherence to policies and legislation
  • Improvements in employee satisfaction and morale
  • Happier customers
  • Better supplier relationships
  • Decrease in completion times (and the number of bottlenecks)
  • Decrease in operational risk

Consider measuring these returns using tools such as surveys and net promoter scores. While this type of research can yield quantifiable data, you can’t be sure that these improvements are directly related to the new automation tool. It may be tempting to make this association, but the correlation is not equal to causation.

Step 4: Analyze

After calculating the hard and soft ROI, you need to analyze the data to see gaps in your automation implementation program. Were employees happy with the software initially, but morale plummets after the third month despite falling costs and increasing time savings? Perhaps a training program could improve their confidence? Numbers can speak volumes and will be invaluable in supporting your long-term optimization.

Conclusion

Saying goodbye to legacy processes and diving into uncharted waters can be scary. But as you see the returns of automating time-consuming, paper-based processes, you will be glad you’ve made the switch. Boosted working processes help extract high-quality work from the existing workforce, contributing to business growth in multiple ways.

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