Automation in the finance close process is a crucial tool that significantly improves business operations and promises efficiency results. But how can you calculate the real value? Control, quality and speed are expected, so the solution relies on quantitative measurements of ROI and how to calculate them for more accurate outcomes.
Let’s break it down.
Financial close automation is the use of software to streamline, standardise and automate the tasks involved in closing the books at the end of a financial period. These tools help in reducing errors and time spent on manual work. By using automated methods, organisations achieve greater control and real-time financial visibility.
Finance teams can easily streamline important finance operations, such as month or year-end close reconciliation, journal entries, manual payments, close task management and more. This technology will increase accuracy, overall efficiency and collaboration.
Measuring ROI demonstrates the tangible value of automating financial close activities. It helps finance leaders justify investments and align process improvements with business priorities. Key benefits include:
Financial close solutions can require significant investment, but with measurable returns, the payback period is often short, delivering both operational and strategic value.
Understanding the return on investment (ROI) of financial close automation is key to making informed, cost-effective decisions. This step-by-step guide breaks down how to accurately calculate ROI by identifying costs, quantifying benefits, and estimating real value.
Before diving into the numbers, it's essential to understand how ROI is calculated. This formula provides a clear way to measure the financial value of financial close automation:
ROI (%) = [(Total Benefits – Total Costs) / Total Costs] × 100
This formula helps compare bith quantitative and qualitative benefit from automation to the cost of implementing and ongoing maintenance.
Calculating ROI starts with a complete understanding of all the costs involved in automation. These can include:
|
Type |
Example |
|
Upfront Costs |
Licensing fees, implementation costs and training |
|
Recurring Costs |
Subscription fees, maintenance and IT support |
|
Opportunity Costs |
Downtime during implementation, employee time |
Be sure to include both initial and ongoing expenses to get a realistic view of your investment and its return.
Next, calculate the advantages that automation can offer. To help you with your estimations, consider the following categories and examples:
|
Benefit Type |
Example Calculations |
|
Labour Savings (People benefit) |
(Hours saved/month × hourly wage × 12) |
|
Error Reduction Savings |
Avg. cost of errors × error reduction rate |
|
Faster Processes (Company Benefit) |
Time saved × value of faster close/reporting |
|
Compliance/Risk Mitigation |
Estimated avoided penalties or fines |
|
Cost Saved from Decommissioning of Legacy Systems |
Financial impact of better data |
These estimates should reflect real operational gains.
Estimating the timeframe for ROI is essential for setting clear expectations and aligning automation initiatives with strategic planning. A well-defined timeframe helps finance teams synchronise automation costs and projected savings with annual budgets, making it easier to justify the investment.
Most automation platforms show ROI within 6–18 months, but model ROI over 1–3 years to understand both short and long-term value. However, analysing both short- and long-term impact helps create a more complete case for automation.
Let’s see how the investment translates to costs and savings using an example:
Year 1 ROI:
➡️ ROI = (38,000 – 35,000) / 35,000 × 100 = ~8.57%
Year 2 (no upfront cost):
This shows how ROI improves dramatically after the initial investment year. As upfront costs are covered, ongoing benefits like labour savings and error reduction continue to deliver value. According to this example, after a 24-month period, the total ROI is 280% reflecting efficiency gains.
While financial close automation solutions often require upfront investment, the long-term ROI outweighs the upfront costs. These tools improve the control quality and speed, but also improve visibility in financial operations for better and faster decision-making. As a solution's usage scales, the ROI continues to grow, transforming upfront costs into long-term success. By investing in cutting-edge financial solutions today, you empower your organisation to make smarter and faster decisions, transforming tomorrow’s challenges into opportunities.