April 23, 2019
Business managers love to say, “Time is money,” but in reality, they often overlook how much time—and money—their own people are wasting right in front of their eyes. Time is definitely money, though. When a worker spends time on any activity, that’s costing your business money. Reducing time spent on work tasks, or processes, saves money and makes people more productive. Advances in business process automation software make this possible.
Understanding the Costs of Manual Business Processes
How much does it actually cost for someone in your business to do something? Take, for example, the routine act of authorizing a check for a vendor. On a manual basis, this business process involves a series of steps, each of which is performed by a human being. First, he or she receives the vendor’s invoice. Then, the worker looks up the corresponding Purchase Order (PO) in the ERP system. He or she may then check with the person who signed the PO to see if the vendor’s work is finished. The invoice is then sent to the approver, who looks at it (usually on a computer, but often on paper) and then approves it for payment.
With the approval in hand, the worker then manually enters the payment information into the accounting system, manually generates a check and takes it to an approved check signer for signature. It is then manually placed in an envelope and put in the mail.
Is this a problem? Not necessarily, but it’s virtually guaranteed that a process like this costs more than it should. To understand why, it’s necessary to become familiar with the concept of the fully-allocated cost of labor. The cost of the worker performing each task in the check authorization process is based on the worker’s salary plus all the costs related to his or her employment. These include things like office overhead, insurance, benefits and so forth. Factoring these cost elements into the equation, it might turn out that the worker costs $60 an hour to the company. If the check authorization takes ten minutes, that costs you $10. If you’re approving a thousand checks a month, that’s a $10,000 expense.
Processes and Productivity
The efficiency of business processes correlates with worker productivity. The more work an employee can do in a given time period, the more productive he or she will be. For example, imagine that one worker spends all month on check authorizations, costing you $10,000 per month. Then, what if you could enable that person to perform the check authorization process twice as quickly? Then, he or she would spend half the month on that business process at a cost of $5,000.
In the aggregate, the productivity of a business translates into revenue per person. A highly productive business, like a tech firm, might have revenue of millions of dollars per employee. In contrast, a comparatively unproductive manufacturer of low-cost products might have revenue per employee of less than $100,000 per year. In general, increasing worker productivity contributes to higher revenue per employee and, as a result, higher earnings.
What is Business Process Automation?
Business Process Automation (BPA) is a technology that makes workers more productive by automating the steps in executing a business process. In the check authorization example, a BPA tool might automatically route the invoice to the approver, including a digital version of the PO in the approval request. The person responsible for the check authorization might see a digital list of approved invoices instead of manually chasing down each approver. The check writing process could be similarly automated.
How Automating Business Processes Makes People More Productive
BPA cuts down on the time spent on manual tasks. With BPA, people become more productive. They can complete previously manual tasks in less time. The reduction in time means a reduction in fully-allocated labor costs. Costs per process come down. With fewer employees needed to perform business processes, the business grows more productive. This could happen as the result of staff cuts or through business growth that occurs without the need to hire additional people.
We work with companies on BPA implementation. To learn how we can help your business become more productive, visit https://businesssoftwareeducationcenter.org
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