ep_ex3


 
Exhibit 3  Examples of an IT ROI
 Calculation
1 Calculate the monetary value of IT initiative benefits
Outputs Benefits Monetary value
Increased productivity Increased profits from new customers (number of new customers (50) X average customer profitability ($1,200)) $60,000
Time savings (2 hours per week 3 50 work weeks in a year X average labor cost per hour ($40) X 100 employees) $400,000
Increased capacity utilization Cost savings $50,000
Improved quality Increased on-time deliveries reducing cost of grievances $10,000
Direct IT cost savings Reduced hours of system downtime (10 hours saved X average labor cost per hour ($40) X 100 employees) $40,000
Channel optimization, customer loyalty value creation Increased profits from existing customers (increased average existing customer profitability by $1,000X 310 customers) $310,000
  Total benefits $870,000
     
2 Calculate the total cost of IT initiative
Costs   Monetary value
Front-end direct costs of IT initiative Hardware, software, installation and configuration costs and overhead $350,000
Disruption costs related to human factors Hours lost because of IT training (5 hours per factors employee X average labor cost per hour ($40) X 100 employees) $20,000
Disruption costs related to organizational factors Technical disruptions, resulting in lost orders and lost customers (20 customers X average existing customer profitability ($1,200)) $24,000
Costs of risk mitigation Development and implementation of IT performance framework $6,000
  Total capital costs $400,000
Operating costs of IT initiative Direct IT operation costs, maintenance costs ($2,500 per month X 12 months) $30,000
  Total operating costs $30,000
     
3 Calculate the IT initiative of ROI

FEATURE

Tackling TCJA changes this tax season

Return preparers must be ready for how the Tax Cuts and Jobs Act has modified many common features of individual and business returns.

PODCAST

Why CPAs can’t wait on automation tools

What do accounting firms waiting on others to develop AI, automation, and data analytics tools have in common with a baseball fan sitting in a stadium filling with water at an exponential rate? The answer could determine your firm’s fate.