The ROI of Better Workflow in Finance Departments
By Toni Buffa Posted February 15, 2022
Finance operations is an area where improved workflows will always be welcome. Finance teams need to engage in numerous internal and external transactions where speed and accuracy are critical. Accordingly, if better workflows can be achieved by shifting from manual processes to automation, most finance departments will wholeheartedly embrace the transition.
But can your finance team actually point to a return on investment (ROI) for implementing automation technology? After all, finance teams should be focused on bottom-line numbers like ROI as much as any other part of the company, if not more. The answer is yes — you just need to know where to look for that ROI.
Here we explore how improved workflows in finance departments positively impact ROI and how to calculate that ROI.
Less Time Processing Transactions
Processing internal transactions is a large part of the workload for finance departments. Just consider some standard finance functions, such as the request-and-approval processes for new vendor contracts or capital expenditures (CapEx). When these complex step-by-step processes are performed with paper documents, spreadsheets, faxes, and emails, they can quickly bog down in bottlenecks.
Automated workflows can cut down transaction processing time drastically. Your finance team can use one central portal to submit requests, make approvals, or provide more information where needed. The automated system can ensure that all internal rules are followed for any specific task or process, which reduces the oversight and double-checking required for manual workflows. Accordingly, you can see the ROI of faster transaction processing in your saved labor costs for your finance department.
Streamlined Approval Workflows
Beyond reducing transaction processing time, automation also streamlines approval workflows and generates ROI in other ways. Many finance operations approval workflows include several levels of approval. The approvers are busy managers or executives who are traveling and often unavailable during regular business hours. This results in a delayed approval cycle, where necessary expenditures are not made promptly, and pricing opportunities for time-limited quotes may be lost.
With an automated approval workflow, your finance team can reduce the effort and labor costs at virtually every step. For example, the approver can quickly request clarification of any request on the central portal, and the clarification can be promptly provided. The same streamlining applies to reviewing any supporting information for a request. And these actions can be taken from mobile phones, decreasing the delay due to having approvers on the road. This translates into a substantial ROI due to saved labor costs and the ability to lock in limited-time preferential pricing when it is available.
Automated workflows also reduce errors, significantly impacting an area as meticulous as finance operations. Manual spreadsheets and paper-based documentation are both prone to human error. Automated workflows can avoid these errors by performing calculations and ensuring users go through all necessary steps for any task.
By avoiding errors in invoice approvals or purchase requests, to use a couple of examples, your finance team is avoiding both the initial costs of those errors and having to expend the resources necessary to correct those errors. In addition, your team can avoid the cost of adding another layer of approval, such as an extra round of invoice reviews.
Increased Employee Satisfaction
You cannot fairly evaluate automation’s impact on ROI without looking at its positive effect on employee satisfaction. Employee frustration with inefficiency and constantly cleaning up messes can lead to burnout and potentially resignation. On the other hand, automation frees up a finance team from low-level monotonous work while increasing efficiency and accountability.
When your finance team is happier on the job, your company is avoiding the cost of recruiting and hiring replacements who will need time to get up to speed. This cost includes the staff and managerial time of onboarding and training a new hire. It also consists of the reduced productivity of new hires while learning.
Regulatory compliance must be a top priority for any finance department. The monetary and reputational cost of any regulatory fines can be high. In addition, the labor costs in dealing with any regulatory failure can balloon quickly. Companies also need to respond to regulatory audits, which tend to be a massive burden with manual processes in place.
An automated workflow can automatically enforce internal controls, helping ensure your finance team will not fall afoul of regulations in the first place. Importantly, automated systems can automatically generate audit trails for any specific action, which minimizes the cost of compliance with regulatory audits.
How to Calculate the ROI of Better Finance Operations Workflow
Determining the cost of implementing automated workflows is relatively straightforward. For any automation solution you consider, you can select the cost of software licensing and maintenance or the price of a subscription to a cloud-based service. Add to this any training, service, or maintenance costs, and you can obtain a relatively good idea of your up-front investment.
On the other hand, determining the ROI of automation will take some digging. For example, do you have information from exit interviews to determine whether employee frustration with manual processes drives your turnover?
Fortunately, there is a more straightforward way to estimate the ROI resulting from the faster transaction processing and error reduction with automated workflows. When analyzing the number of specific transactions (such as CapEx requests) your team processes monthly, you can see the total costs and labor time associated with each transaction. By seeing the reduction in per-transaction costs, the monthly and annual ROI of automation can be calculated quickly.
Use the ROI of Automation as a Selling Point for Implementation
If you would like your finance department to improve its workflows through automation, be prepared to demonstrate the ROI of implementation. Please take a look at our Workflow Automation ROI Calculator to see the positive effect on your company’s bottom line that you can expect from automated workflows.
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