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AcctTwo Blog

Has Your Boss Tasked You with Evaluating a Software Purchase?

Tasked with Selecting Accounting Software?Are you the VP of Finance or a manager in your company's accounting department? Or are you an accounting department team member? Are you the wearer of many hats at a small, fast growing company? You might handle scheduling, purchasing, invoicing, even answering the phones. But now you've been asked to add to your plate the research and evaluation of a new, more sophisticated accounting or enterprise resource planning (ERP) software solution. To top it all off - you're not going to be the one who makes the decision in the end.

This is an important task - to you, to your manager, and to your company as a whole. You want to succeed at this and you want to find a solution that meets the needs of your business for a manageable cost. It has been tasked to you because the company both has faith in you AND because your manager doesn't feel he or she has time to take this on. But shielding your boss, or the decision-maker, from this evaluation process is not a good idea, even if it seems like what they want.

Functional Requirements

The first thing you should gather is a list of functional requirements for your business. An internet search is good place to start for this. You can find a variety of functional requirements suggestions for accounting software. But make sure when you're asking vendors questions about functionality, that you're not just asking questions for the sake of asking them. Include the decision makers in determining what requirements and what questions should be included in the evaluation. Some of the areas of concern are:

  • Performance, Availability. and Security
  • General Ledger
  • Reporting and Dashboards
  • Purchasing and Accounts Payable
  • Order Processing and Accounts Receivable
  • Time and Expenses
  • Cash Management
  • Project Accounting
  • Possibly Multi-Currency and Multi-Entity Capabilities

Return on Investment (ROI)

While new software may have sexy features and functions that will likely transform your daily tasks, you may struggle to turn your excitement about these details into a strong argument for making a purchase. Do some research around Return on Investment (ROI) and Total Cost of Ownership (TCO) for the various solutions you look at. Here is a simple way to calculate ROI:

Simple ROI = (Gain from Investment – Cost of Investment) / (Cost of Investment)

In order to find the numbers needed to plug into this formula, arrange meetings with all the key players in the accounting processes to identify all the tasks that are done manually or involve duplicate or unnecessary effort. Try adding up all the hours spent on these tasks per month or per year. Get input from your boss on what kind of cost per hour to use in your analysis. Then work with the software providers to determine which of these tasks can be automated and how many hours of effort can be eliminated. Multiply the hours eliminated by your cost per hour and you have your gain from investment. Other areas can be added to the gain from investment category, if they can be quantified. Stretching software beyond its capabilities or using spreadsheets to keep accounts can lead to mistakes, even fraud. Talk to management about any known incidences where such mistakes may have cost the company money.

Total Cost of Ownership (TCO)

Total Cost of Ownership is a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system. When comparing different solutions, make sure you're aware of the hidden costs or associated costs of purchasing software - hardware required, hosting, IT staff, infrastructure, future costs to upgrade, as well as time and effort spent evaluating the options. These costs, in addition to the nominal software price, make up the total cost of ownership. You're going to have to sell the solution you want based on the needs and wants of management, who will have a keen eye for the bottom line. We, of course, recommend looking at the new cloud-hosted SaaS solutions as they can get a fast-growing business up and running on the new software quickly without large investments in infrastructure. SaaS software also eliminates the high costs associated with keeping the software upgraded and up to date.

Get Help From Experts

There are a lot of resources out there to help you through this process. AcctTwo can help - just click the box at the top-right for a complimentary assessment of your company's financial function. Intacct also has an upcoming webinar that would be invaluable in this assessment:

Register Here for the Webinar on Best Practices for Selecting Accounting Software

Another resource we recommend for help with this process is:

FindAccountingSoftware.com

They provide free, expert advice for companies looking to move to a new accounting platform or ERP solution.

We Want You...to Keep Them in the Loop!

So in facilitating the evaluation of new enterprise software, you have the opportunity to be involved in an important process, build your value to the company, and improve your work experience. But remember that you're not the decision maker, so keep those decision makers in the loop, whether they seem to want it or not. Meetings with vendors can be taxing on the schedules of busy executives and managers, but shielding them from these discussions can often lengthen the time required to make a selection, kicking the can down the road. If you are compiling long lists of questions and requirements that you don't have the experience or authority to evaluate, you may be wasting your time. Instead, make sure the decision makers are involved in at least approving these requirements, and whenever possible, make sure they attend presentations, meetings, and Q&A sessions with the different vendors. You may find that the evaluation is far less lengthy, costly, and painful when managers and executives participate.

Topics: Blog ROI TCO accounting software Software Total Cost of Ownership (TCO) Software Evaluation software selection Software Return on Investment (ROI) Informational Functional Requirements Featured Posts Consideration