How Much is a Minute of Your Time Worth?
Value of Time
Opportunity cost, in microeconomic theory, is the value of the alternative option in a decision. This cost represents the missed value from your mutually exclusive options. The cost can be explicit, like $100, or implicit, which are not reflected in a concrete dollar amount but just as real.
Time is valuable and, arguably, also has an associated opportunity cost. When you choose to read an informative, moving blog post like this, there is an associated opportunity cost of not checking your Facebook for this slot of time. (Or a myriad of other opportunity costs associated with what you will not do in order to read the post.)
Procurement is largely about the value of your time. Not to devalue the other important aspects of procurement like quality, time is a huge factor in two ways.
- The time it takes to process your data
- The time it takes to use your data
The cost of processing just one invoice often surprises those who are not already tracking this information. Small differences quickly add up to big savings or big costs. According to CFO.com, invoice processing costs vary from $4.98 for top performers, $7.75 for the median, and $12.44 for bottom performers. So in just 100 invoices, a poorly performing company spends $746 more than a top performer and every incoming invoice for a low performer costs about $8 extra.
Spend data is incredibly powerful and can shape your organization’s strategies and future. Unfortunately, too many companies have data that gets to them too late. Even the best data is worthless if it is outdated.
E-procurement gives companies real-time access to their data. They can see their spending up to that point by category, by department, etc. Understanding the value of your time and the power of timely data is crucial for your procurement success.
To learn more about the value that e-procurement can add to your organization, reach out to our representatives today in the form below. You can also register for a free live demo here.