Jim Clarkson, Jr., CPA

Purchasing accounting software can be similar to some of your personal expenditures, such as a house or a car. You need something that meets your needs, budget and functional requirements. You want reliability, performance and, above all, a sense of security. All too often software vendors have promised a great deal but delivered a lot less than the customer expected.

When you purchase a house or a vehicle, you can estimate the payback based on your experience. Evaluating accounting systems is not such an exact science. Usually you are improving processes or systems, not necessarily saving costs. However, in a world where we are all increasingly "time-poor" – time is money and anything that saves time will inevitably be a good investment as long as you purchase the right thing!

Accounting Software Assessment

Therefore, as a guide, ask these questions before considering any accounting software which you believe can contribute to the success of your organization:

  1. What is the size of the software supplier, in terms of resources/people, customer base, financial size and profitability?
  2. What is the pedigree and track record of the software provider?
  3. Can you speak to a number of other customers who have bought exactly the same software to use for a similar purpose as your own?
  4. What are the future expansion possibilities for this software? Do they have a product development roadmap?
  5. Can the software vendor automatically keep you updated on technical and legislative developments and will this be part of the software support?
  6. How well will the software vendor support your business and what are the ongoing support and maintenance options?
  7. What training and consultancy does the software vendor provide?

The lesson is, do not buy the least expensive software but buy the most appropriate software for your needs.

One of the most common issues we hear concerns the rate at which the technology seems to change or evolve. It is important to budget for upgrades and additional licenses when you are considering a software purchase. This needs to be part of your formula for calculating ROI. After all, if the software is effective it will help you grow and you will want more people to use it.

ROI Metrics 

In terms of a formula for calculating your return on investment, there is no exact science since organizations vary in terms of size and needs. Some areas to consider when quantifying your ROI include:

  • Saving time on processes – automation may substantially reduce the time spent processing jobs, reports or analysis - which saves costs and allows staff to do more value-added activities. 
  • Preventing cost and project overruns – software will make "actuals" much more visible to contract managers and financial teams, so overruns can be spotted quickly.
  • Effective buying – having a database of historical costs on jobs or services will improve pricing for future activities.
  • Access to historical data – means less reinvention of the wheel and the ability to look at successful programs and base future decisions on that information.
  • Reducing risk – islands of information such as Excel spreadsheets in the field or "institutional memory" of a manager can be captured with good accounting software, ensuring that if key individuals leave your organization, that knowledge is not lost and the impact is reduced.

Although determining an ROI for your software purchase is not an exact science, our experience shows that some thoughtful analysis and planning can help justify the investment.

For more information on evaluating your accounting software investment, please feel free to contact Jim Clarkson at 877-755-0745 or jclarkson@blumshapiro.com.

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