How to cost an AI automation before you build it

Start with what it costs you today, not with what AI costs

Almost every AI proposal we see starts from the solution and works backwards to a justification. That ordering hides the only question that matters, which is whether the process is expensive enough to be worth automating at all.

The baseline is four numbers and you probably already have three of them.

• Volume — units per month. Invoices, enquiries, calls, documents, tickets.
• Minutes per unit — how long one takes a person, honestly, including the interruptions.
• Fully loaded hourly cost — salary plus everything else, not the salary line.
• Rework — the share that come back wrong, and the minutes to fix each one.

Annual baseline = volume × minutes ÷ 60 × hourly cost × 12, plus the same calculation applied to rework.

Then cost the system honestly, including the year after

A build quote is not the cost of the system. The cost of the system is the build plus what it takes to keep it working, and the second number is the one that gets left out.

• Build — scoped and fixed before work starts, or it is not a number.
• Model and infrastructure — cost per transaction at your volume, not at demo volume.
• Monitoring and maintenance — accuracy checks, eval runs, model migrations, integration drift.
• Human exception handling — the share that still needs a person, times what that costs.

The exception rate is where most models go wrong

A system that handles 80% of cases cleanly does not remove 80% of the cost. Someone still has to identify which 20% needs attention, pick it up cold, and finish it — and handling an exception usually costs more per unit than handling a normal case did.

Model that explicitly. Automation rate, exception rate, and the cost of an exception. A proposal that quotes an accuracy figure without an exception cost is quoting half the arithmetic.

Cost per transaction is not fixed, and it grows in the wrong direction

Token cost at launch is not token cost at month six. Conversation history accumulates, retrieval returns more context, prompts get extended by whoever is iterating.

Model the cost at your real volume and at three times it. If the economics only work at pilot scale, they do not work.

When the answer is not to build it

Roughly a third of the candidates we look at fail this test, and the reasons repeat: volume too low to amortise the build, a process so inconsistent that no system could be scoped against it, or a much cheaper fix hiding underneath — a changed form, a deleted approval step, a report that already exists.

Saying so early is the cheapest value a firm can deliver, and it is the part most vendors have no commercial reason to say.

If a proposal has no list of things the vendor recommends against, they have not done this arithmetic — or they have and they are not showing you it.

A worked shape

Take supplier invoices. Four thousand a month, six minutes each to key and reconcile, a fully loaded cost of ₹600 an hour, and 8% needing rework at fifteen minutes apiece.

The baseline is 4,000 × 6 ÷ 60 × ₹600 × 12, plus 4,000 × 8% × 15 ÷ 60 × ₹600 × 12. That arithmetic gives you a real annual figure to hold a build cost against — and it is arithmetic you can run in a meeting, using your own numbers rather than an industry average somebody put in a slide.