Will the reporting software your company chooses offer a good return on investment?
So shouldn’t that same line of thought be applied when your organization selects reporting software? Well, of course it should. But time and time again, I’ve watched companies fail to fully comprehend how reporting software can maximize their ROI dramatically.
In response, I’ve compiled this article that shows you how to:
Let’s jump right in.
As defined by Investopedia, return on investment (ROI) is:
“A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.”
So simply stated, a positive ROI is the benefit you get when you invest in a worthwhile venture.
To calculate ROI, the equation is: (Benefit of the investment - cost of the investment) / cost of the investment.
To answer this question, take a look at these three steps:
Let’s say you have a team of three people who all work full-time on reporting. They average $140K each in salary and benefits, and you discover that they can save 50% of their time for five years by implementing reporting software. Following the logic listed above, you’d come up with the following equation:
$140K x 3 full-time employees x 50% savings x 5 years = $1,050K
It goes without saying what a huge return on investment that is.
Let’s say you get 15 licenses for a specific reporting software (and training) in year one. (For the sake of example, we’ll use ClearPoint software.) You also spend 40 hours of your own time in year one learning the software and teaching your team how to use it. So, following the logic above:
40 hours is 2% of your time for three people, or $8,400 + 5 years of reporting software at $12K/year, or $60,000 = $68,400.
Maybe you don’t purchase ClearPoint software, or you need more training, or you get premium support and other services—so your costs go up. In that case, let’s round the number up to $200K. So, your return on investment would be: ($1050 - $200) / $200 = 425%.
Most organizations are looking for an ROI of somewhere over their cost of capital. This is typically about 20% or less. So, you’re probably wondering what this “425%” is all about, and whether we over-estimated the savings. For arguments sake, let’s assume that’s true.
Even if we cut the savings in half, you would still have an ROI of over 160%.
What does this tell us? Well, one thing's for sure: it tells us that an investment for a good reporting software tool is a very safe—and smart—investment. Plus, you haven't even factored in the benefits that can't be quantified of working with an organization like ClearPoint.