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ePayables SMARTSet™: An ROI Calculator

The Ardent Partners’ SMARTSet™ (Supply Management Assessment and Research Toolkit) is a comprehensive set of research tools and templates designed to help AP organizations navigate the solution selection process and maximize the value driven from investments in AP technology (or ePayables). The five-document series includes:

The second tool in the SMARTSet series is an ePayables ROI Calculator. One of the most important aspects of any business case is the financial analysis that supports it. While competing projects can have very different requirements and benefits, “Return on Investment” is one measure that allows enterprises to compare projects in an apples-to apples way. ROI is a performance measure used to evaluate the efficiency of an investment and is helpful for use in comparing the relative efficiency of a number of different investments. 

This interactive research tool will help Accounts Payable (“AP”) leaders/teams calculate a Project ROI, an IRR, a Net Present Value (NPV), and an estimated Project Payback Period for an ePayables (AP Automation) solution. This ROI Calculator helps AP teams organize and aggregate their current costs, develop an investment budget, estimate potential gains or benefits from the ePayables solution, and calculate an expected return on the investment made in the solution(s). The Calculator also enables scenario analysis so teams can test optimistic and pessimistic outcomes and understand where the most leverage in their ePayables initiative exists so they can develop a plan that maximizes returns. This tool evaluates the potential investment over a three-year period, which is the industry-standard period of time to evaluate a technology investment. And, as an added value, this ROI Calculator contains embedded Ardent Partners’ Accounts Payable market research data and benchmark statistics to serve as a reference or proxy in making certain estimates and calculations.

While the final output is very detailed, the calculator was designed to be highly intuitive and easy-to-use. The tool includes nine interactive worksheets to help AP leaders/teams present a comprehensive analysis of the potential investment opportunities. Each worksheet contains detailed instructions to guides users through the entire process in an efficient manner. Below is a description of the each worksheet included in Ardent’s ROI Calculator:

  • Annual Operating Expenses: Captures the current annual AP department operating expenses including staff and all other operating expenses
  • Current Processing Costs: Calculates the current average cost per invoice and payment by comparing actual AP expenses to actual invoice and payment activity
  • Opportunity Costs: Determines the annual cost of AP inefficiencies (late payment penalties and missed early payment discounts)
  • ePayables Investment: Captures the assumed investment that will be required to launch the solution(s) in the base year and support the solution over a three year horizon. This ROI Calculator accounts for the fact that the solution may be either cloud-based or installed.
  • Efficiency Estimates: Allows the project team to estimate staff and operating expense efficiency gains that will occur after the new solution has launched and fully adopted.
  • Adoption Estimates: Allows the project team to estimate the adoption rates of the solutions in each of the first three years.
  • ROI Calculation: Presents a Three-Year Project ROI, a Project IRR, an estimate Project Payback Period, and a Net Present Value of the Project; Also includes a list of key project assumptions
  • Steady-State AP Department Operating Expenses: Shows the details of the estimated impact on staffing and operating expenses that will occur when the project has reached a “STEADY-STATE”
  • Steady-State Pmts Worksheets: Shows the details of the estimated impact on payment processing costs that will occur based upon the payment type assumptions

This calculator will help AP teams prepare a clear and compelling business case for an investment in specific solutions and develop and present an ROI (“Return on Investment”) model that is specific to their planned investment. This calculator will be a huge time-saver and an invaluable tool in helping AP leaders make a case for automation and transformation.

For more information about this report and how to access it, click here.

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