In the fast-paced digital era, businesses are constantly seeking ways to streamline their operations and enhance efficiency. One powerful tool that has emerged to drive success in this era is business process automation (BPA). By automating repetitive tasks and workflows, BPA aims to achieve several key objectives that are crucial for businesses to thrive.
The objectives of business process automation
The objectives of business process automation are closely aligned with the goals of digital transformation. When organizations start considering BPA or even when expanding their existing automation workflows, setting objectives or automation goals is the first stage of the process.
The objective of BPA is what the project is aiming to achieve. The outcome is the business change that is a direct result of the output. The benefit of BPA is the measure of the advantage (ROI) gained by the organization through achieving the outcome.
First and foremost, one of the primary automation goals is to improve operational efficiency. By automating manual processes, businesses can eliminate human errors, reduce time-consuming tasks, and increase productivity. This allows employees to focus on more strategic and value-added activities, ultimately leading to cost savings and improved customer satisfaction. The purpose of BPA is not to replace humans but to do repetitive tasks that can tax human employees.
The reduction in errors is a tangible number that can be evaluated before and after automation.
Another important objective of BPA is enhancing accuracy and consistency. Manual processes often leave room for errors due to human factors such as fatigue or oversight. With automation, businesses can ensure that tasks are performed consistently and accurately every time. This not only improves the quality of work but also minimizes the risk of compliance issues or customer dissatisfaction. Automation allows businesses to enforce standardized workflows, minimize errors, and ensure consistency in the output. Automation can also incorporate validation checks, data verification, and real-time monitoring to enhance accuracy and quality control. Improved accuracy and quality contribute to customer trust, loyalty, and differentiation in the digital era. To know more about the top processes that businesses are automating, have a look at our earlier article on this topic.
Furthermore, BPA aims to optimize resource allocation. By automating repetitive tasks, businesses can allocate their resources more effectively toward activities that require critical thinking or creativity. This not only maximizes the utilization of resources but also enables employees to focus on tasks that add value and drive innovation within the organization. This is another ROI that can be calculated, more on that later in the article.
Of course, the fundamental automation goal, important for any business, is cost reduction as it directly impacts profitability and financial sustainability. Automation can help lower labor costs by replacing manual labor with software-based solutions or robotics. It also reduces the need for physical resources, such as paper or office supplies, and minimizes the risk of errors that can result in costly rework or customer dissatisfaction. By optimizing resource allocation through automation, businesses can save costs while maintaining or improving operational efficiency. This must be measured before and after automation.
Lastly, BPA strives for improved scalability and agility in business operations. As companies grow or face changing market dynamics, they need a flexible infrastructure that can adapt quickly. Scalability is essential for businesses operating in an evolving digital landscape. As businesses grow or experience fluctuations in demand, manual processes may struggle to keep up, leading to delays, inefficiencies, and customer dissatisfaction. Automation provides the ability to scale operations efficiently by handling increased work volumes without significant resource additions. Automated workflows can be designed to adapt to varying workloads, ensuring consistent performance, faster response times, and improved customer experiences, even during peak periods.
Businesses can automate a part of the business process or many processes across many business functions. Here is more insight into the differences between Workflow Automation and Business Process Automation.
Calculating the return on investment ROI for business process automation
Calculating the return on investment (ROI) for business process automation involves comparing the benefits gained from the automation against the costs incurred to implement and maintain the automation solution.
A good time to calculate the business process automation ROI is after the process has been implemented and sufficient data has been collected to evaluate its impact. This should also be done annually.
Here’s a general approach to calculating BPA ROI:
1.Identify costs of automating a business process
Initial BPA Implementation Costs: This includes the cost of software licenses, hardware, infrastructure setup, implementation services, and any necessary training or consulting fees.
Ongoing Costs: Consider recurring costs such as maintenance and support fees, software updates, hardware upgrades, and any additional personnel required to manage and maintain the automation system.
2.Quantify the Benefits of BPA Implementation for your business
Labor Cost Savings: Determine the reduction in labor costs resulting from automation. Calculate the time saved and multiply it by the average hourly rate of the employees involved in the automated tasks.
Error Reduction: Estimate the cost savings associated with reducing errors and rework. Consider factors like error rates, the cost of rectifying errors, customer satisfaction improvements, and potential revenue loss from mistakes.
Increased Productivity: Assess the increased productivity resulting from automation, such as the ability to process more transactions in a given time or handle additional workloads without hiring more employees.
Time Savings: Calculate the time saved by automating processes and multiply it by the hourly rate of employees involved.
Cost Avoidance: Identify any costs that are avoided or minimized due to automation, such as reduced paper usage, printing costs, storage costs, or penalties for non-compliance.
ROI formula for Business Process Automation
Subtract the total costs (both initial and ongoing) from the total benefits obtained.
Divide the net benefits by the total costs.
Multiply the result by 100 to express it as a percentage.
ROI = ((Total Benefits – Total Costs) / Total Costs) x 100
Evaluate the ROI:
Compare the ROI percentage to your organization’s expected threshold or target using the above ROI formula. A positive ROI indicates that the automation initiative is financially beneficial.
Consider other intangible benefits, such as improved customer satisfaction, enhanced data accuracy, faster turnaround times, or increased competitive advantage.
Remember that ROI calculations are estimates and may not capture all potential benefits or costs accurately. It’s essential to conduct a thorough analysis and consider both quantitative and qualitative factors to make informed decisions about business process automation.
So it is better to calculate the total value of ownership TVO:
TVO = ROI + TBO +TRG
Where TBO is the Total Benefit of Ownership i.e. the qualitative benefits such as improved customer experience/support etc.
TRG is the Total Resources Gained, which is a number arrived at by calculating how much annual employee capacity has been freed up through automation.
If your organization is ready to explore how your business processes can benefit from AI and automation services, the Senior Management Automation team at iTech can help you with insights, assessments, and automating your workflows.
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