What is that manual job costing you?
A few minutes here, a few minutes there. Enter how often one job happens and how long it takes, and see what it adds up to over a year, how much time could come back and whether a change could pay for itself. Nothing you type leaves your browser.
A guide, not professional advice. Related reading: What a business process review actually finds.
In short. To work out what a manual process costs, multiply how often it happens each week by the minutes it takes, convert to hours, multiply by the working weeks in a year and by the number of people involved each time, then multiply by the full hourly cost of the people doing it. Time you free up is capacity, not cash, unless spending actually falls.
How the numbers work
- Hours a year = times per week x minutes each / 60 x working weeks x people involved each time.
- Cost a year = hours a year x the full hourly cost (pay plus employer costs such as taxes, pension and holiday).
- Hours that could come back = hours a year x the share you think could be removed.
- Value of that time = hours that could come back x the full hourly cost.
- Net value a year = value of that time minus 12 x any monthly running cost of the change.
- Payback in months = one-off cost of the change / (net value a year / 12). If the net value is zero or less, the change does not pay back on these figures.
The result is an estimate built only from the figures you enter. Freed-up time becomes a saving only if spending actually falls, for example fewer overtime hours, no new hire or a contractor you no longer need. Otherwise it is capacity your team can spend on something else, which is still worth knowing.
A worked example
A small firm re-keys every new order from email into its accounts system. It happens 40 times a week and takes 12 minutes each time, done by one person, over 46 working weeks. That is 368 hours a year, roughly nine working weeks. If around half of that could be removed by connecting the two systems, 184 hours would come back. Multiply by the full hourly cost of the person doing it to see the value, then compare it with what the change would cost to make and run.
Questions people ask
How do you calculate the cost of manual work?
Work out the hours it takes over a year, then multiply by the full hourly cost of the people doing it. The hours come from how often it happens, how long it takes, how many people are involved each time and how many weeks a year you work.
What is a full or loaded hourly cost?
It is what an hour of someone's time actually costs the business: their pay plus employer costs such as payroll taxes, pension contributions and paid holiday. It is higher than the hourly rate on a payslip.
Does automating a task always save money?
No. It frees time, and that time only becomes a saving if spending falls. It also has costs of its own to build and run. Sometimes removing a step or writing a clearer procedure does more than any software.
When is a manual process not worth changing?
When the hours are small, the task is rare, or the change would cost more to build and run than the time it frees. A low number is a useful answer: it means your attention belongs somewhere else.
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