Find your cost – Steps 4 and 5 – Apply Cost and Do a Little Math

Everybody loves math… well maybe not everybody. I tell my kids that they will use math for the rest of their lives… to this point they are unconvinced.

Last week I wrote about getting back to the basics by defining automaton as being only as good as the time that is freed up. This week I have walked you through the steps of finding your cost. Keep in mind that once you have found your cost you can pull the time savings out of the number. To recap the steps:

Finding your cost:

  1. Create a Process Map
  2. Notate on the Map, People
  3. Document the Time Each Person Sends on a Task

Now for the big one… the fourth step is to apply money to the time and tasks on the process map. I have had people go over board on this by applying people’s salary, plus benefits, plus IT cost. I recommend that you make it simple by only applying the person who is doing the task’s salary. If you need too you can also get a good number from online resources like salary.com.

To find your cost you now have (1) Map (2) People (3) Time and (4) Money. The final step is to collect in one dollar amount, per month, the entire cost of the process. Then, take the number of invoices you process every month and divide by the overall cost and you will have your cost per invoice. Doing this by month is important because invoice volume has a tendency to have peaks and valleys that can be smoothed out over time.

I have found the average cost of an invoice process to be $22, but like I mentioned in the 2 buckets post not all of the $22 can be eliminated. Next week I am going to write about how to pull time out of the cost per invoice by putting this information on a spreadsheet…. stay tuned.

Buy the book – The Argument to Automate – How Innovation Can INSPIRE Not Fire – click here to buy

(Also) To get your copy of The 8 Pitfalls of Accounts Payable Automation – click here to buy

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