There is no standard way of measuring what the return on investment of a Business Management Software implementation will be. It will vary for each business and will depend on the value of the time savings and efficiency improvements that the organization gains. Here are some factors to look at when you are trying to understand the return on investment for your company.
- Understand the costs : Know in advance how many licenses you will need, what modules or enhancements you will be adding and what the cost of the software will be. Also look at the additional costs that we have already mentioned including installation / configuration, integration, data migration, customization, and training.
Once you have a solid understanding of what the Business Management Software implementation will cost, review the benefits that you will gain from the system and how it will help your company grow. Some of the benefits to consider are:
- Improved productivity: By automating many of your business processes you and your employees can focus on other tasks that will help grow the business instead of being bogged down by administrative work.
- Reduced labor costs: Streamlining your processes can also reduce the number of staff you need to make your business run effectively.
- More accurate and timely information: Getting the right information to the right people at the right time can help you make better strategic decisions, give you an up to date picture of your business, speed up your collection of receivables, keep more precise inventory records, and more accurately price your products.
- Generate more customer revenue: By more quickly recognizing the emerging needs of your customers you can close more of your prospects, increase your revenue per customer, and reduce client turnover rates.
- Lower operating costs: An effective Business Management Software system can help you reduce the ongoing technology costs of maintaining legacy systems as well as eliminate operational costs such as paper invoices and mailing costs through tools like electronic billing.
Here is an example using MusicNetwork AG, one of the leading Swiss distributors of audio software and hardware located in Zurich . They had revenues of almost US $4 million before looking at SAP Business One as their Business Management Software provider. It took them 10 weeks to implement the system which included little required training, a migration of their data from their existing applications, and a complete reporting system so management could better understand how their business operates. Some of the recognized benefits that MusicNetworks realized were:
- Revenues increased by 5% through improved price and invoice management
- Value of stock holding reduced by 17% annually
- Cash collection cycle reduced by four days
- Employee productivity improvement: Sales department: 61%, Customer support department: 40%, IT operations: 75%
- Return on Investment:
- Payback period (static): ten months
- Net present value (3 years at 10% discount rate): approximately US $500,000
- Internal rate of return: 271%
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