Measuring the ROI of Robotic Process Automation (“RPA”) Implementation

Mar 23, 2021 5:04:10 PM

Robotics Process Automation (RPA) should already be on your radar when it comes to your company’s technology initiatives. It’s an ideal candidate to achieve greater efficiencies in how you do daily business. With various paths and platforms available to achieve automation, we wanted to explore the value that RPA can bring to you. The benefits to your business and your employees can be massive. But are those benefits worth your investment to achieve them? The question becomes — how to calculate return on investment (ROI) for RPA?

RPA Functions

Before diving into the details of ROI for RPA, it is important to understand the types of tasks RPA is best suited to address.

RPA takes over repetitive tasks that can consume a significant amount of time when performed by team members. These tasks are often clerical or data management functions. These tasks are important to the everyday operation of a business, and mistakes in these tasks can be costly. 

Locating the best processes for RPA Implementation

As a company embraces RPA, they identify more and more tasks that can be automated, but which tasks should be prioritized to a company’s initial RPA implementation?

Rule-based tasks

Clearly defined, rule-based tasks with very few exceptions to their rules are ideal for initial RPA integration. These tasks do not require much human decision-making to accomplish — tasks like searching for and exporting data from a CRM.

Labor-intensive tasks

Tasks that require team members to spend more than an hour to complete are prime candidates for automation. Labor-intensive tasks are often also time-intensive. RPA can drastically reduce the amount of time these tasks take away from your team.

Tasks with readable data

To optimize initial RPA implementation, tasks with Optical Character Recognition(OCR) to digitized text data are an excellent choice for RPA because that data can be used, if required, as part of the RPA process. Images that are not recognized by an OCR tool will not be able to be automated.

Tasks with structured data

Data with defined, searchable categories is ideal for automation. There are Artificial Intelligence (AI) tools that can help bring the efficiency of RPA to unstructured data, but more often than not, those tools won’t be brought into use until an RPA ROI analysis has shown the value of automation.

These tasks are repetitive and time-consuming for workers, but they require focus because errors can have a domino effect that throws off analytics and even deliverables. 

What does this look like in the real world?

These types of tasks can be challenging to visualize. For example, we can look at how some Customer Relationship Management (CRM) functions are carried out to see where automation could benefit.

When using your CRM system to send out a monthly call to action to your client base, the data often has to be reformatted from how it is ordered/categorized in the CRM application to how that data needs to be ordered/categorized to be used by your mass-emailing service.

That’s a pretty simple process when you only have one CRM and one mailing to send out—it’s a simple matter of exporting data and running a macro on the spreadsheet. 

But if you run a business that sends out marketing materials for multiple clients, you can easily have more than one full-time employee spending up to half their work week pulling information from client CRMs and reformatting that data.

And that’s just one example. Tasks like these are common across just about every department of every successful business in the world.

By using RPA to automate these tasks, your team will be free to use that bandwidth for more jobs that require the type of human ingenuity that robots simply aren’t capable of.

How to Calculate ROI for RPA Project

Now that we have some background into the types of tasks that are best suited to RPA, we can begin to examine the ROI of RPA.

It is important to remember that there is more than one way to look at how RPA benefits a business. There is the financial benefit, of course, but there are also more intangible benefits such as employee morale or vendor relationship management. 

In order to get a complete picture of the ROI of RPA, we must look at the financial costs, potential benefits, and how to factor in the human part of the equation.

Return on investment - what is the actual cost of implementation?

Because RPA software is tailored to each individual business that uses it, there isn’t a one-size-fits-all answer to how much the software will cost. It should be noted that RPA is relatively inexpensive compared to some other Software as a Service (SaaS) programs.

Because RPA software is designed to focus on the types of tasks we looked at earlier, it integrates fairly easily into existing architectures.

Cutting costs 

While many companies have capable IT workers, contracting experts in RPA software design and implementation can save on costs. An in-house IT specialist will need to take the time to learn how to design a scalable RPA system, design the process, and implement it. 

While that may seem like it would cost less, that means your specialist will be foregoing their other duties for an extended period of time. By bringing in experts from outside your company, you streamline the process and save time and money.

RPA maintenance costs

Another cost of investment is the cost of maintenance. Much like the cost of software development, this cost is usually quite reasonable. This is because if your RPA software is developed in-house, you have already budgeted for this cost. After all, you already employ the people who will perform the maintenance.

If you hire a firm to develop your RPA, the cost generally remains low because many of these companies train your IT experts in maintenance and auditing your software as part of your contracted business. As the technology improves and grows, that relationship ensures that your business stays on the cutting edge of automation.

The Benefits of Investing in RPA

To see the benefits of RPA, we have to look at the costs of operating without it. Remember: the tasks we are looking at are clearly defined, repetitive, labor-intensive, and time-consuming tasks. 

These are tasks that prevent your team members from doing the core work you hired them to do in the first place!

Repetitive, repetitive, repetitive tasks... all over again

Say you have a full-time employee that needs to take two hours out of each workday to perform the types of tasks that RPA addresses. Over the course of a week, they are putting ten hours into these repetitive tasks. 

That’s 40 hours a month and more than 400 hours a year. By automating those functions, your team member now has hundreds of hours dedicated to higher priority tasks. 

RPA works by creating robots, or “bots,” that can quickly learn, mimic and, in the end - execute the entire process based on the process rules. A bot is a software program that operates on the Internet and performs repetitive tasks. 

Bots that perform robotic process automation tasks are significantly less prone to the types of mistakes humans make. A human can lose focus while entering data and enter a value into the wrong cell, throwing off every cell that follows.

That doesn’t happen with bots. In the rare case that an error occurs, RPA programs’ searchability makes it much easier to find that error. 

It can take hours poring over a spreadsheet to figure out where a human entered the incorrect value that threw every calculation off. With RPA, that search can be accomplished in minutes or less.

This all boils down to that if time is money (and it is), then RPA provides massive ROI by reducing the time it takes to perform necessary but repetitive tasks and assure the quality of those tasks. RPA also allows employees to focus on their core job functions instead of taking huge chunks of their days and weeks to perform repetitive tasks. 

Better time management

Those time savings also generate benefits for your team that are less tangible. Many surveys and workplace studies have shown that when employees can focus on their jobs’ core functions without getting bogged down in the kinds of tasks that RPA would automate, their satisfaction with their jobs goes up.

Higher employee satisfaction means lower turnover, which takes an intangible benefit and turns it into something concrete — because more satisfaction means less employee turnover. 

Reducing turnover means higher productivity because fewer resources go to candidate searches and onboarding.

ROI by The Numbers

It’s clear by now that the ROI of RPA can be difficult to quantify since the benefits are far-reaching and aren’t confined to only numbers — but it is folly to pretend that numbers aren’t of paramount importance when making business decisions.

With that in mind, here are some criteria by which ROI can be measured. When you look at these factors, you can get an idea of the values that can be best used in an RPA ROI calculator.

RPA_ROI Calulator

Download Example RPA ROI Calculator here

Critical Criteria

An important thing to remember about these criteria is that you need to implement RPA into your processes to see an accurate representation of your ROI because RPA is unique to each business that uses it.

It’s also important to approach these criteria with clear goals. Just as RPA is designed to address specific types of tasks, be specific in how you calculate the benefits.

Speed: How quickly does the process you are examining run from input to output? How does that processing speed improve with RPA?

Quality: How often do your team members need to find and rectify errors? How does that time bite into other activities they could be doing, and how much does that time cost you?

Productivity: Finding your team’s speed and quality will give you an idea of your team’s productivity. This is also where you can see how much time an employee spends on repetitive tasks vs. how much time they can focus on higher-level tasks.

Calculations

With these criteria, we can then figure out a general calculation for potential RPA ROI. Keep in mind: these numbers will only be estimates if you run them before RPA implementation.

By looking at the speed at which potentially automated tasks are completed by your existing team — including the amount of time spent rectifying errors — you can calculate the cost of those processes.

You take the amount of time spent to complete the tasks and use the employee cost of the team completing those tasks to see how much you have spent on those processes.

The best indicator of the return of investment can be boiled down to the simplest explanation. Try comparing the before and after the state of things.  When you look back - how much effort was taken to perform a repetitive task? Multiply that with the salary of all of the people working on that task. After adopting the RPA - try summing up how much did your RPA solution cost and the cost of people managing that solution.

rpaequation

Using AP Automation as an Example

Accounts Payable Automation is a great area of business to highlight how the ROI of RPA can work to your benefit. With all the invoices and contracts, AP Automation is an area that is full of the types of tasks RPA was made for.

Human error can lead to invoices getting mismatched. A partner that provides services to more than one department within your company may get paid twice accidentally. A missed decimal point could result in a massive overpayment to a vendor. An invoice could get missed entirely, which would not be included in your total liability, and a vendor that was not getting paid on time.

Fixing the costly errors

Fixing these errors can seriously damage your bottom line. They can result in inaccurate financials, duplicate payments, late fees, and unhappy vendors.

Studies show that processing an invoice manually costs a company somewhere between $14 and $17. A simple mistake can cost around $50 to rectify — and that’s only the mistakes that don’t throw you out of compliance with contracts or regulatory organizations.

By incorporating RPA, the cost of processing invoices drops to around $3 per invoice, and the occurrence of mistakes is drastically reduced. When mistakes are made, the searchability and auditing functions of RPA software reduces the cost of rectification exponentially.

Finding the missing link easier

Additionally, AP automation reduces the risk of missing invoices and helps you take better advantage of early-pay discounts and rebates. You will reduce the risk of making costly (not to mention unnecessary) mistakes.

Using RPA and AP Automation will increase job satisfaction among your accounts payable team. Instead of keying invoices, they can focus on higher-value tasks such as fixing out-of-tolerance invoices — thereby further increasing ROI.  Robotic process automation is an excellent choice for any growing business, whether you are a beginner or adding a bit of finesse to your processes. 

The cost of development and implementation is reasonable when you weigh in all the benefits. Of course, in order for everything to work seamlessly, it is important to find adequate help and advice from the experts in this field.

RPA increases the speed and accuracy with which time-consuming, repetitive, necessary tasks are completed while freeing team members to focus on the core functions of their jobs which increases employee satisfaction and reduces turnover.

A good balance of all elements for best results

So, in the end, what is ROI in RPA? It is the balance of the cost of development, implementation, and maintenance of a system that provides measurable business benefits in higher productivity, fewer costly errors, and more satisfied team members. 

But those benefits are only the beginning. As artificial intelligence (AI) and machine learning (ML) technology continues to advance, more opportunities will arise. Right now, RPA focuses on the types of tasks outlined earlier, but the range of tasks to which RPA can be applied is growing quickly. 

Better insights

Adding ML or AI to the solution, RPA can be applied to unstructured data and better organize and analyze the information you gather to create more detailed insights and provide more complete pictures for you when making business decisions.

There are plenty of RPA specialists who can take your business to a higher productivity and efficiency level. But instead of repeatedly hoping to find exactly the right solution or vendor, reach out to the experts at TEAM IM to see how RPA can benefit your company.

Financial benefits and beyond

Return on investment is almost always used in strictly financial terms, and RPA certainly gives a solid financial ROI. But the benefits go so much further. 

Freeing your team to engage their creativity and ingenuity to innovate and excel in your field by removing the repetitive and time-consuming functions that RPA can take care of has the potential to take you farther into the forefront of your field than a simple cost/benefit table could ever explain.

So when you ask how to calculate ROI for RPA projects, don’t stop at the balance sheet. Look at the big picture. RPA is accelerating the digital transformation, and it can give your organization a competitive edge.

FAQ

What is an approximate payback time after the implementation of RPA?

It depends on the scope of your project but in most cases - it could be between three and nine months. Pay-back time is usually shorter in a service model than when licensing the technology. This is due to the lack of flexibility in adjusting the capacity to actual needs.

What kinds of tasks can be automated with RPA?

RPA takes time-consuming, labor-intensive, rules-based, clearly defined tasks with readable, structured data off human team members’ hands. These are often clerical or data-entry focused tasks.

Should RPA be developed in-house?

RPA can be developed by in-house programmers, but with the time it will take for a software developer that is not already experienced with RPA, it is often less expensive to hire an outside organization to handle development and implementation.

What is the best way to calculate the ROI of RPA?

This can be a bit complicated. You can look at the hourly cost you pay for your team members to address the kinds of tasks that RPA would automate and compare it to the cost of implementation. There are also more intangible benefits that come with RPA.

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