CPA Practice Advisor

JUL 2016

Today's Technology for Tomorrow's Firm.

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6 July 2016 • www.CPAPracticeAdvisor.com FROM THE TRENCHES By Randy Johnston from supporting sheets or simply plugged into your model. We suggest the follow ing components always exist: • Hardware costs • Soware costs • Training costs • Initial implementation fees • Recurring annual hard costs • Recurring annual so benefits e replacement of two scanners is illustrated in the table below. We are happy to provide this template to you. Note that there are subtotals that show total hard costs, so costs and an overall project ROI. If there were multiple ways to solve a technical problem, you could have multiple ROI models or have a model that compares these numbers side by side. For example, if you are considering Microso Office 365 versus an Open License model, you would want the costs and benefits of each approach. You may want to portray the costs of in-house IT, managed ser vices and hosted options. Some cautions and common errors Remember that any model is just that: a model. It is not a g uarantee of success nor w i l l you a lways remember to consider all factors. It is a common error to overlook key issues or items. However, the model does help you think through each project and justif y or deny the project on its merits. Remember that a good ow ner manager sometimes has to " just decide" to implement a project because it is the right strate- gic thing to do. However, we k now a number of decisions are simply made emotionally w ithout any model. For example, how do you justif y the car that you drive? A nother common error is over estimating the so ROI. Be realistic in your estimates. You may learn over time that you have a tendency to overestimate or underestimate. A er doing the post project analysis, look at the numbers and actual results, assuming that the factors can be measured. As an example here, there has been a trend to "throw away the time sheet". If you did that, how much time was saved by not keeping time? How was this time used? Some of these ty pes of analysis are impos- sible w ith the financial information of many firms. Flat rate value billing may simply be a pricing strateg y that had lile to do w ith wasted time during firm operations and you won't be able to do an accurate post project ROI analysis. We frequently see overly optimistic benefits of work ing any- where, any time, any dev ice (A A A) w ithout factoring in the issue of r unning more slowly. We also see too much or too lile value placed on work ing remotely. However, remem- ber that these estimates are yours, and you need to objectively rev iew these numbers aer implementation. One last common error: never believe a vendor's ROI model. You can and should adapt their numbers to your model, but we recommend consistenc y year a er year so you k now your estimates are correct. We believe a number of technolog y initiatives have been implemented with false ROI expectations. You can use this model to estimate the ROI on any ex isting recurring IT cost and have a pre y good idea where you are geing a reasonable return and where you are not. However, be prepared if you do this exercise, because some of the numbers may not be too pleasant. On the other hand, it may be hard for you to see the so benefits of a deployed technolog y because you are used to the way it works. We frequently see perceived cloud benefits because local implementa- tion was done so poorly. Likew ise, we frequently see perceived local installation benefits because recur- ring costs tend to be lower. Project ROI Calculation 7/18/2016 Name of Project: Scanner upgrade Projected benefit $7,645.75 Number of Users: 9 Loaded Partner/manager rate $ 166.25 Loaded Admin rate $ 33.25 Expected Life: 7 years Implementation timeframe: 2 weeks Business or IT objective met: Improve paperless quality Expected benefits: Reduced time used in the scanning process Cleaner, more usable scans Initial Expenditures Hardware $2,200.00 Software 1,500.00 Training 1,000.00 Time lost during implementation 299.25 Implementation fees 800.00 Total Initial Outlay $5,799.25 Hard Cost Reductions (Annual) Labor no longer needed $8,645.00 Maintenance reduction 1,000.00 Total Reduced Costs Annually $9,645.00 Benefits over project life $67,515.00 Hard ROI ()=good $(3,845.75) Recurring Annual Costs Annual Maintenance $500.00 Replacement supplies 500.00 Software Licensing - Total Recurring Annual costs $1,000.00 Costs over project life $ 7,000.00 Soft Benefits (Annual) Client Value $1,000.00 Time savings/year 2,600.00 Error reductions 1,200.00 Total Soft Benefits Annually $4,800.00 Benefits over project life $33,600.00 Estimated Project ROI year one $7,645.75 Estimated Project ROI other years $13,445.00 Estimated Project ROI over project $88,315.75 REMEMBER THAT ANY MODEL IS JUST THAT: A MODEL. IT IS NOT A GUARANTEE OF SUCCESS NOR WILL YOU ALWAYS REMEMBER TO CONSIDER ALL FACTORS. IT IS A COMMON ERROR TO OVERLOOK KEY ISSUES OR ITEMS.

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