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How to Measure ROI on Your Cloud Accounting Software

According to an urban legend, Albert Einstein once called compound interest "the most powerful force in the universe." Whether he actually said this or not is beside the point: Compound interest is indeed remarkable for how it can transform a small sum into a cash hoard worthy of Scrooge McDuck.

For example: CBS Moneywatch once estimated that $6.11 deposited into a bank account in 1913, with a 20 percent annualized return, would have been worth more than $350 million by 2011. Even a 10 percent rate would have yielded nearly $70,000 over the same period. Anyone lucky enough to have made that deposit would have had no trouble calculating the huge return on investment.

Determining ROI on your new budgeting and forecasting software is a little more complex. In addition to ensuring that it is saving you money (compared with Excel or a desktop solution), you'll also want to check that it is increasing overall visibility into your business and setting it up for revenue gains.

3 things to consider when calculating ROI for a financial application

Switching from spreadsheets and QuickBooks to cloud accounting software is a big upgrade for most SMBs. But due diligence is necessary to ensure that the service provider's infrastructures and applications are superior to anything you could deploy on your own, and that they can deliver superior ROI to an on-premises solution.

We can break down the ROI of the best cloud financial software by mapping it to three specific areas and seeing the stark contrast with the alternatives:

1) Business visibility
Legacy accounting often gets bogged down by manual processes for invoicing, renewals and maintenance. Plus, it becomes even more time-consuming because of difficulties in comparing discrete operating units, such as franchises and international locations.

Need an idea to save money? Start by changing your accounting software.

Need an idea to save money? Start by changing your accounting software.

In comparison, cloud software enables faster time to information as well as deeper insights into that data. You can see what happens across multiple and/or consolidated entities, all in real time. Workflows such as revenue recognition can also be customized and automated, so that you can swiftly get an accurate picture of your business, make smart decisions and close your books faster than ever before.

2) Revenue gains
When managed primarily through spreadsheets, orders and invoices are very error-prone documents. These mistakes have real costs. Revenue leakage can add up and trouble with renewal management can mount. Multi-entity management and dealing with deferred revenue also become more complicated.

Cloud applications help you avoid these sorts of issues through faster tracking and broader collections. Financial close processes can be streamlined, with fewer delays, miscues or overdue accounts receivable. Along the way, reporting accuracy can be greatly improved over what was possible in Excel. Finally, integrations with partner systems become easier.

3) Cost savings
Tracking money for your company shouldn't cost a lot of money. Yet it often does, due to a wide range of issues including data entry errors, infrastructure upgrades (e.g., databases, networks, security, etc.) and compliance headaches. The roots of these problems often reside in outdated software that has been force-fitting to the tasks at hand.

"Cloud reduces the hidden expenses associated with on-prem applications."

A cloud-based solution instantly reduces many of your hidden expenses associated with on-prem applications, such as hardware refresh cycles, renewal and maintenance fees and labor costs attached to extensive IT personnel. Additional money is saved through the increased productivity and automation that cloud financial software offers in spades. More specifically, automated billing and reporting reduces processing errors, while fewer invoice disputes (thanks to a single version of the truth) help reduce churn.

Compound interest may still be the most powerful force in the universe. But cloud automation, as seen in financial management software, is not far behind, especially if your SMB needs liftoff for its everyday accounting operations.

RKL Team

Written by RKL Team

Since 2001, RKL eSolutions has helped growing companies maximize their technology resources and investment. Over the years, we have helped hundreds of small and medium sized businesses as their strategic business partner. We specialize in the needs of Entertainment, Software & SaaS, Professional Services, Manufacturing, and Non Profit organizations. Our experienced consultants have a passion for making every facet of your business successful and are intent on building a long-term relationship with every client.