How to calculate ROI for accounting software
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#Accounting software #Calculate ROI #Calculators 3 mins read

How to calculate ROI for accounting software

ROI stands for the phrase Return On Investment. More clearly in business, investments to improve the company, such as time and money and ROI are considered as a result of the return on investment performance.

Currently, the accounting industry group has to handle a lot of work for businesses: revenue and expenditure management, tax calculation,… making the accounting department overloaded. Calculating ROI is also difficult, so the software industry has come up with tools – solutions to support accountants. Calculating ROI, tax calculation, revenue, and expenditure management,… is no longer difficult because accounting software is available.

How to calculate ROI 

Analyzing investments (time, human resources, assets,…) is always the top concern of business owners. Useful ROI for business goals. In theory, calculating ROI is very simple:

[Return on investment – cost of investment] : [investment cost] = ROI

In other words, ROI is calculated as net profit over a certain period divided by investment costs, which are then multiplied by 100 to express the rate as a percentage. 
For example Store 1 sells shoes for $5 – Store 2 sells shoes for $3, but it will cost you $5 to get there, then applying the ROI calculation you will find that it is more economical to buy Store 1. 

[$2 savings on shoes – ($5 spent on gas + $3 spent on shoes)] : [$8] = -0.75 or -75%

ROI negative ROI means you lost $7.5 per trip. Do you want to not lose money? make your ROI positive. 

We need accounting software and how to calculate ROI for accounting software? Unfortunately, it’s not as easy as the example above, but we can help you get the hang of it.

First, you need to determine the cost of the accounting software.

Accounting software market

The cost of accounting software today varies widely, from free up to thousands of dollars per month.
In addition to the price of the software, you also need to factor in other costs such as:

  1. Staff training
  2. Maintenance
  3. Moving and data storage
  4. Technical support

Also for free software, you will have to pay for some upgraded features, time-consuming to use proficiently,… 

What is the value of accounting software?

The value of accounting software varies depending on the size of the business. It is difficult to determine the exact value of software if you do not know what your needs for the software are, let’s look at the basic requirements for accounting software.

  1. How much do you have to pay for accounting services every year?
  2. And how much time per month do you spend on accounting?
  3. How much time can be saved each month with a new accounting system, an accounting software?

Let’s say you hire employees to handle your accounting work. Their aggregate hourly wages go up to $50 per hour. They have too much work and have to work 10 hours per week, 80 hours per month, and can reach 1000 hours per year.

If you’re paying someone $50,000 a year to do your bookkeeping – there’s a way they can do it more efficiently, in less time, and cost-effectively for the business, Do you care?

For example, accountants can handle their jobs in half the time by using accounting software to automate processes such as accounts payable-receivable, invoicing, Expense tracking, payroll, and tax management. Now, you only pay about $25,000 per year to do the same work half the time.

Accounting software offers a financial value of $25,000 per year savings, with other values ​​being greater accuracy and saving staff time on other tasks. Now investing in accounting software doesn’t seem too bad, right?

How to Calculate ROI for Accounting Software

Now that we have a rough idea of ​​the value of accounting software and the price range of accounting software, we can fill in the ROI calculation formula.

[nvestment return – investment cost] : [investment cost] = ROI

Take for example UpDiagram, a management software with extremely cheap prices from free – $30 for Pro – to $70 for Enterprise. Let’s try to calculate ROI based on the above example with $25,000 as return on investment, businesses use the Enterprise package for 12 months for $840 as investment costs.

[$25,000 save on UpDiagram – $840] : [$840] = 28.8 or 2880% ROI

2880% ROI that’s great. That’s a savings of $24,160 per year. Imagine what your small business could do with that money… you could buy a new delivery van, hire a new social media manager, raise your salary, or open a barbecue. of the company. Because UpDiagram will continue to use over time, the ROI of the business will increase as time goes on.

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