How to calculate the cost of a process per case
The cost of a process per case is the processing time of each step multiplied by the hourly rate of the role doing it, plus any fixed cost per pass, summed over all steps and weighted by how often each step runs. Multiply by the cases per year and you have the annual cost. Waiting time costs nothing in this calculation, which is exactly why it is easy to overlook.
The formula
The app calculates cost from the same model that gives the lead time. Each step belongs to a lane, and each lane has an hourly rate.
- Processing time is in minutes, hence the division by 60.
- Query effort is included: a step with a 25% query rate and 8 minutes of effort per query adds 2 minutes per pass.
- Fixed cost per pass covers material or external costs, for example postage or a fee per transaction.
- Automated steps have no staff cost; only their fixed cost counts.
Worked example: invoice check
In the invoice example, accounts payable works at €55 per hour and division management at €95 per hour. Accounts payable spends 6 minutes entering, 1.25 × 4 = 5 minutes checking and 5 minutes posting, 16 minutes per case. Management spends 0.3 × 5 = 1.5 minutes approving.
| Lane | Minutes per case | Hourly rate | Cost per case |
|---|---|---|---|
| Accounts payable | 16 | €55 | 16 ÷ 60 × 55 = €14.67 |
| Division management | 1.5 | €95 | 1.5 ÷ 60 × 95 = €2.38 |
| Supplier (external) | – | – | €0 |
| Total | 17.5 | €17.04 |
What goes into the hourly rate
The hourly rate should reflect what an hour of that role costs the organization, not the gross salary divided by contract hours. Typically it includes salary, employer contributions and an allowance for workplace costs, divided by the productive hours per year. Many finance departments have such a rate per cost center; use it if it exists and say where it came from.
If no official rate exists, agree on a rate with the person who will use the result and write it into the process settings. A consistent, documented rate is more useful than a precise one nobody can explain. Comparisons between the current and the future process are hardly affected by the exact rate, because both use the same one.
Why waiting time does not appear in the cost
An invoice that lies in an inbox for a day costs nothing in this calculation. That is correct for staff cost, but it hides other effects: missed early-payment discounts, reminders from suppliers, follow-up calls from customers. These are real, but they depend on the business and cannot be derived from the process model. If they matter, record them as fixed cost at the step where they occur, with a note on how you estimated them, or discuss them alongside the figures.
Relation to activity-based costing
Activity-based costing in accounting allocates the overheads of cost centers to activities and derives a cost rate per activity, used for pricing and cost allocation. The calculation here is narrower and more concrete: it starts from the process model and asks what the work in this process costs per case, based on time and hourly rates. It does not allocate overheads that are not tied to the process.
The two approaches complement each other. Accounting can provide the hourly rates; the process model shows which steps drive the cost and what a change would save. For that second question, see Future process and measures.
Typical mistakes
- Including waiting time in the cost: the lead time is long, but nobody is paid to wait.
- Ignoring visits: loops and decisions change how much work each step generates.
- Using one rate for everyone: an approval by management at €95 per hour weighs more than its minutes suggest.
- Forgetting automated steps: they have no staff cost, but they may have a fee per transaction.
- Reporting cost per case without the volume: €17 per case is minor at 50 cases a year and significant at 12,000.
Try it
Open the worked example and change the hourly rate of accounts payable or the share of incomplete invoices: cost per case and per year follow immediately. For a quick estimate without drawing, the process cost calculator builds a short process from a few steps and calculates it with the same logic.
Try it in the editor
Invoice check (worked example) · 1,000 / month
The worked example uses €55 per hour for accounts payable and €95 for management; change a rate and the cost per case updates at once.
Open the example in the editorFrequently asked questions
What is the difference between cost per case and cost per transaction?
They are the same idea: the cost of handling one unit of work through the process. "Case" is used here because a case can include several transactions, such as an invoice that is checked twice.
Does the calculation include IT costs?
Only if you enter them as fixed cost per pass at a step. License costs that do not depend on the number of cases do not belong in the cost per case.
Why is the cost of automated steps zero?
Automated steps need no person, so they generate no staff cost. If a service charges per transaction, enter that as fixed cost per pass.
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