How to Calculate the ROI of Finance Automation: a Practical Guide to Understanding How to Assess an Investment into a New Tool

Finance automation promises significant efficiency gains and enhanced business operations, but how do you quantify its true value? This guide simplifies the process of calculating your investment’s return on investment (ROI), ensuring you understand the worth and impact of automating your financial processes.

What Does  Finance Automation Mean?

In an era where business efficiency is synonymous with technology adoption, financial automation stands out as a transformative force for businesses of all sizes. What does it practically mean for a business?  Use of technology to automate time-consuming, error-prone and repetitive processes, finance teams can easily simplify and streamline their key finance operations, such as billing, accounts receivable & payable, month-quarter-year-end close reconciliation, procurement, financial planning and analysis (FP&A). This not only enhances accuracy but also boosts overall efficiency within the finance department and parts of the business.

Calculating the ROI of Finance Automation

First, we start by breaking down the costs and benefits.

Initial costs: Understanding ROI starts with a clear view of the upfront costs. This is not just about buying software. It is about considering every related expense, from system integration and training to potential upgrades needed to ensure everything works seamlessly together. This step sets the foundation for understanding the financial commitment required.

Identify the Returns: Next, it is essential to pinpoint what you stand to gain and understand both the immediate and long-term impact of benefits like speeding up operations, reducing errors, and freeing up your team to tackle more strategic tasks. 

– Short-term Direct Gains: How quickly does the system start paying for itself?  Automation can dramatically reduce manual efforts in financial operations, leading to direct savings in time and labour costs. Enhanced speed and reduced errors in processes like invoicing translate into operational efficiencies that are easy to quantify and reflect in your bottom line. Assessing short-term financial gains like immediate cost savings or efficiency boosts helps justify the initial outlay.

– Long-term Strategic Advantages: Look beyond the immediate. Some of the biggest wins from automation are not easily quantified but are vital. These include more informed strategic decisions due to better data accessibility and the agility to adapt to new business opportunities or challenges quickly. Improved accuracy, better compliance, enhanced employee satisfaction—all these contribute to a healthier, more dynamic business environment. 

Leverage Tools and Metrics to Measure the ROI

Implement and monitor KPIs closely: Calculating ROI is not just about numbers; it requires evaluating both clear-cut gains and less tangible benefits. Start by assessing measurable outcomes such as cost reductions and increased efficiency by comparing financial performance before and after implementing automation. Metrics, like decreased Days Sales Outstanding (DSO) for accounts receivable automation or improved payables turnover, provide concrete evidence of success. 

However, capturing the full spectrum of benefits means also considering intangible improvements—such as employee satisfaction and customer service quality—which can significantly impact your business. These are typically harder to quantify, but tools like employee satisfaction surveys and customer feedback offer valuable insights into these areas, allowing you to gauge the broader effects of your investments in technology.

Use the Right Tools: To measure the ROI effectively, utilise resources that can analyse and present data clearly, such as like ROI calculators, data analytics software, and industry reports to support your calculations. These tools can provide deeper insights into how automation impacts your financial health and operational efficiency and compare pre-automation and post-automation performance results to see the evidence of automation success in action. 

In conclusion, understanding the ROI of finance automation involves a clear approach that spans economic, operational, and strategic dimensions. By carefully assessing all benefits and costs, organisations can make well-informed decisions about their investments in automation technologies, ensuring these tools deliver value that far exceeds their cost.

Would you like to learn more? For more comprehensive insights and real-world applications discussed by industry experts, watch our on-demand webinar produced with PayEm, available for free below: 

Further resources

– Download the slides from the webinar here

– AR Automation Benefits Analysis spreadsheet

About PayEm

PayEm revolutionises spend management with a user-centric approach. The platform offers customised employee request forms, dynamic approval workflows, budget control for informed decision-making, and AI-powered invoice processing, simplifying finances and promoting accountability. 

About Kolleno

Kolleno is a financial operations platform that brings together receivables, payments and reconciliation – all in one place. The platform is built for and by finance professionals to automate and optimise back-office processes, including client payments, related communications, and financial reporting, through highly customisable workflows.Powered by advanced AI capabilities, Kolleno pulls data from all incoming accounting systems, ERPs and CRMs, and deciphers context-sensitive data into actionable insights.

Djibrane Larrabure

Are you looking to centralize your payments, collections and reconciliation in one place? Book a demo to learn how Kolleno helps businesses to free up resources and focus on core priorities.

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