How to Calculate the Return on an Automation Investment

How Is Automation ROI Calculated?

Calculating the return on an automation investment means comparing the labor-hours currently spent on a process (and their cost) with the investment cost of automating it, and the reduced time afterward. Rather than relying on invented industry averages, this article offers a concrete method you can apply with your own data.

Step 1: Measure the Current Process

Measure how long the process you're considering automating currently takes:

• How many minutes/hours does one cycle take?
• How many times per month does it repeat?
• How many people are involved?

For example, assume an invoice approval process takes 20 minutes per cycle and repeats 300 times a month. Total monthly labor hours: (20 minutes × 300) / 60 = 100 hours.

Step 2: Determine the Unit Cost

Calculate the average hourly cost of the employees involved (gross salary plus benefits, divided by monthly working hours). This figure varies by organization, so use your own payroll data. Suppose the hourly cost is $12.

The current monthly cost of the process would then be: 100 hours × $12 = $1,200.

Step 3: Estimate the Post-Automation Time

Estimate how long the process will take after automation. Typically, data entry and routing steps become automated, while only exceptions or final approval require human involvement. It's important to validate this estimate through a pilot or together with your provider, rather than assuming a generic percentage — base it on the specifics of your own process.

Step 4: Include the Investment Cost

Add the platform's license/subscription fee, setup and integration costs, and the team's adaptation time to the investment cost.

Step 5: Calculate the Payback Period

The simple formula is:

Payback period (months) = Total investment cost / Monthly savings

Monthly savings is the difference between the current cost from Step 2 and the remaining cost after automation. Including measurable indirect costs — such as error correction or delays — alongside labor-hour savings gives a more realistic picture.

Things to Watch in the ROI Calculation

• Base your estimates on your own data as much as possible, not generic industry averages
• Assume automation won't eliminate all human involvement; exception handling will remain
• Run a pilot to gather initial data and revise your calculation

If you want to track these metrics in a single dashboard on an ongoing basis, Luci Report makes your process metrics visible and comparable. You may also find our data analysis guide useful for comparing before-and-after data.

Conclusion

Calculating automation ROI should rely on your own process data, not invented percentages. Once you clearly lay out labor-hours, unit cost, and investment amount, you can base your decision on a concrete table. To discuss your automation priorities, get in touch with us.