# Measuring the Current Cost — Estimating AI Automation ROI

Source: https://www.skillbyai.com/en/ai-automation-roi/b-cost

> Time, volume, loaded rates and errors.

## Measure, do not guess

Baseline cost combines **volume**, **time per item** (measured by timing a sample of real work, or from system timestamps, not from opinions), the **loaded cost per hour** (salary plus benefits and overhead) and the **cost of errors** (rework, penalties, write-offs). Measure over a representative period, note seasonality, and record the distribution, not just the average, because complex items often take far longer than typical ones.

## Know today before predicting tomorrow

A measured baseline and a task-level view are the foundation of a credible estimate.

![Three ideas: baseline cost, task decomposition, value types.](assets/figures/ai-automation-roi/section-2-map.svg) — Figure 2.1 — Baseline, decomposition and value types.

## Baseline cost of an invoice process, run

I ran this with plain Python 3. All figures belong to one worked example (an invoice-processing team) with invented but internally consistent numbers; prices are placeholders. 12,000 invoices at a measured 6.5 minutes each take 1,300 hours a month, costing $23,400 at an $18 loaded rate. A 4% error rate at $25 per error adds $12,000, for a baseline of $35,400 per month.

```python
volume_per_month = 12000          # invoices processed
minutes_per_item = 6.5            # measured by timing a sample, not guessed
loaded_cost_per_hour = 18.0       # salary + benefits + overhead, in $ (example)
error_rate = 0.04; cost_per_error = 25.0
hours = volume_per_month * minutes_per_item / 60
labour = hours * loaded_cost_per_hour
errors = volume_per_month * error_rate * cost_per_error
print(f"hours per month: {hours:,.0f}")
print(f"labour cost per month: ${labour:,.0f}")
print(f"error cost per month : ${errors:,.0f}")
print(f"baseline total per month: ${labour + errors:,.0f}")
```

Output:

```
hours per month: 1,300
labour cost per month: $23,400
error cost per month : $12,000
baseline total per month: $35,400
```

## Time a real sample

Timing 50 to 100 real items across different staff gives far better numbers than asking people how long things take.

**Quiz:** What is a "loaded" cost per hour?

- [ ] Only the base salary
- [x] Salary plus benefits and overhead per working hour
- [ ] The price of the AI model
- [ ] The cost of electricity

*Answer:* Salary plus benefits and overhead per working hour. Use the full cost of staff time.