Applying ROI to technology projects

Look beyond the technology to indirect costs.


Video transcript:

So ROI is a very familiar topic to most accountants. Return on investment is often what we think of it as it meaning. It’s fairly standard computation like it’s done. When we start to look at technology projects, though, then things get a little more complicated because now we have to look at not only direct revenue and costs that’s generated, but we also need to look at a lot of indirect things. So an example of an indirect cost that we need to think about would really be things like training or very indirect would be the impact on staff morale. You know, looking at other types of things of what is this actually impacting? What things that don’t have a direct cost could this potentially also impact?

One of the big challenges with looking at a lot of these indirects is that sometimes they can be hard to manage. So it really forces people to think a little bit outside of the box because these are, again, they’re not direct costs, so it’s not like I have an invoice that I can immediately record. I need to maybe look at other things, like I need to capture some hours to understand how much time savings we’re having, and then I need to figure out an indirect labor rate or some type of average cost rate so that I can actually put a dollar amount around it.

So, I also need to look at other things like risk. How am I actually managing risk? I may be a little more inefficient because I’m doing additional risk mitigation steps, but in the end that’s going to result in an overall better outcome, right? So it’s about balancing that efficiency and effectiveness. And it’s that effectiveness—how do I have a higher quality audit? How do I have a more accurate tax return? How do I quantify that?—those are some of the truly, like, far indirect things that I really need to look at and figure out, hey, maybe there’s not a dollar amount that I can put to this, but I need to do these things. 

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