How to review your business software with Cost Analysis

  

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In our previous post I discussed how to tackle the daunting task of upgrading your business software. Today I delve a little deeper into step 1 of that process - assessment.

Before you can even think of contacting software vendors, it's important to understand how your current software relates to your bottom line. Is it as cost-effective as it could be? This post takes you through a step by step assessment.

All too often, minor inefficiencies are overlooked and seen as the cost of doing business as usual. Companies base their decisions on the budget instead of what's best for their actual business needs.

Although sticking with what you've got appears to save money in the short-term, in the long run, the cost of doing nothing about these inefficiencies can directly damage the bottom line.

But how can you actually assign a dollar value to this inefficiency? Here are some key areas that you need to consider in your review.

Doing things twice costs twice as much.

In reality, most businesses duplicate work. For example, if your software is not linked to the accounting back-end, then you run the risk of doubling the time it takes to get things done, as well as the number of errors caused by double-keying. Choose one area of your business to focus on. Then collate some basic information.

For example, calculate the average amount of...

1. Daily transactions
2. Minutes it takes to process a transaction at the time of sale
3. Time it takes to reprocess a transaction into your accounting system
4. Hourly salary including 'on costs'

Analyse the cost of too much service time (if applicable)

Consider additional costs. For example, if you provide a service to others in your firm, what's the actual cost of providing that service? People chasing people and people chasing information takes up valuable time. Do you have spare time in your business to do this? I don't think so. Take action:

1. List each step of the service process 
2. Calculate how long the process takes for your business to complete it.
3. Colour-code each item

• One colour for processes that could be reduced dramatically
• One colour for items that could be eliminated entirely with the right software
• One colour for those necessary processes

Reporting inefficiencies

Make a list of 3 weekly reports which you rely on for decision-making. Then, have a think about the time spent locating reported information, transforming it into a useful format, and piecing together information from multiple sources. For example, it might take 40 minutes to extract information, compile and print it and deliver it as a sales analysis report to each sales team member.

After you have a time estimate for each of these, sum up the costs by multiplying it by the average cost per hour. Voila - you have your bottom line estimate.

Look, it's sometimes hard to visualise a comprehensive cost analysis without clear guidelines, so if you would like to access the table templates the team at Sybiz created for each of these points,  download our free whitepaper by clicking the image below. I hope you find the templates useful.