What assumptions does this example use?
Every number below is a stated assumption, not an industry average — there is no universal cost of manual AR because it depends entirely on your invoice volume and staff cost. Replace any row with your own figures to get a result that means something for your business.
| Input | Example value |
|---|---|
| Monthly revenue | $500,000 |
| Invoices per month | 200 |
| Share overdue at any time | 20% (40 invoices) |
| Manual time per overdue invoice per month | 40 minutes |
| Automated time per overdue invoice per month (exception review only) | 5 minutes |
| Fully-loaded staff cost | $30/hour |
| Current DSO | 45 days |
| DSO reduction from automation | 10 days |
| Cost of capital / opportunity cost of cash | 8% annual |
How much does the manual time cost?
With 40 overdue invoices a month at 40 minutes of manual chasing each, that is 26.7 hours a month at $30/hour — $800/month spent on manual reminders, tracking, and reconciliation. Automating the routine work down to 5 minutes of exception review per invoice drops that to 3.3 hours, or $100/month. The time savings alone is $700/month.
How much is the DSO reduction worth?
At $500,000 monthly revenue, each day of DSO represents $16,667 in daily revenue ($500,000 ÷ 30). A 10-day DSO reduction — from 45 days down to 35 — frees up $166,667 in cash that was previously tied up in receivables. Valued at an 8% annual cost of capital, that freed cash is worth $13,333 per year, or about $1,111 per month.
Check your own current DSO with our DSO calculator (prefilled with this example's numbers) before assuming a 10-day reduction is realistic for your business — the achievable reduction depends on how inconsistent your current manual reminder cadence actually is.
What is the total monthly benefit?
Adding the time savings ($700) to the working-capital value of the DSO reduction ($1,111) gives a gross monthly benefit of $1,811 in this example. Subtract whatever a candidate tool actually charges per month to get the net ROI — the gross benefit needs to clear that bar comfortably, not just barely, since both the time savings and the DSO reduction are estimates that can come in lower than planned.
For what to actually evaluate in a tool before committing to a subscription, see our AR automation features checklist.