Vertex Systems, Inc. 440 Polaris Pkwy, #150, Westerville OH 43082 866-981-2600

The Justification for Software Purchases for Agencies that Serve those with Disabilities

There are times when a social service agency must make a technology purchase, as part of the normal business operation. You may need to buy a server, replace computer hardware, or install a wireless network. And there are times when you need to decide if a technology purchase will provide value and benefits to the organization. Is technology worth the investment? Moving away from documenting case notes and progress on paper or getting rid of paper time sheets for electronic documentation will certainly save you time. If done correctly, there is no way a shift to modern technology will not result in increased productivity. But you will need to consider all the variables to genuinely prove to the executive director, the board, or funding sources that new software, for example, is really an investment and not just an expense. You need compelling financial reasons to justify an investment in software for your agency. Maybe you’ve either outgrown your Excel spreadsheets or QuickBooks software. Maybe you need to eliminate fragmented systems and standardize your payroll, financial or documentation management on a single system. It could be you need to address compliance requirements and standards. Whatever the reason, it’s important to show that you will get something back for giving up some of your limited resources.

Vertex Systems, Inc. 440 Polaris Pkwy, #150, Westerville OH 43082 866-981-2600

How do you obtain buy-in and document the value and savings new software could provide? Put simply, how do you calculate your ROI? A Return on Investment (ROI) Analysis will give you a financial reason for making a software purchase for your organization. ROI is not just a buzzword in the for-profit arena. It is important to human service agencies as well. What is it? The definition is simple – it’s the net benefits derived from the purchase divided by cost, expressed as a percentage. For example, if a project returns $2 in benefits from $1 in cost, the calculated ROI would be 200%. ROI = (Gain from Investment - Cost of Investment) / Cost of investment While the calculation is simple, determining the numbers to use for the tangible (and intangible) benefits and the costs is what makes ROI difficult.

Download an Excel Spreadsheet for ROI Calculations ROI is a pre-evaluation process and analysis of three factors: benefits, costs, and value of a purchase over time. Establishing ROI can help you avoid a technology purchase that is a huge mistake or avoid not investing in a technology that will return many dividends. First, you must consider the overall objectives of why you need to make a technology purchase: Software Purchase Objectives:

• Reduce duplication of effort through a central database • Reduce labor costs through automation • Increase accuracy through forms and controls • Increase efficiency through improved interfaces • Increase quality through standardization • Decrease costs through elimination of paper processing and storage • Increase responsiveness through real-time access • Increase usability through role-based dashboards • Increase teamwork through collaboration tools • Increase compliance through standardized reporting

These objectives will be achieved with software that provides the right benefits.

The ROI process focuses on identifying the benefits from new technology to improve efficiency and effectiveness. Some benefits can be easily translated into

Vertex Systems, Inc. 440 Polaris Pkwy, #150, Westerville OH 43082 866-981-2600

quantitative cost savings (actual dollar amounts) while others cannot. But don’t ignore those intangibles because they are still qualitative benefits.

The following example illustrates how to identify the benefits of a software investment. An executive director, preparing to take a technology purchase proposal to the board could group the benefits as follows:

• Reduced Staff Requirements – Improvements in process efficiencies result in personnel who will be re-trained or re-assigned.

• Reduced Errors – Fewer errors result in more accurate payroll, documentation, and billing.

• Productivity Savings – Staff spends less time entering data, tracking down files, re-entering data into another system, creating reports, preparing accounting statements, and nearly every other process in the agency. They spend more time providing services and generating more billable fees per service.

Example: Let's say you are installing a time and attendance system that will eliminate hand-keying of payroll data. Currently, one person in the payroll department spends 500 hours per year entering payroll numbers from paper timesheets. The system will completely eliminate this task. Assuming that the average earnings of the data entry clerk is $8.65 per hour, plus taxes and benefits of 25%, the variable cost of this labor is $10.81 per hour. Total labor savings of this application is 500 X 10.81 or $5,405 per year.

• Improved Consumer Satisfaction – Clients and their families will see greater progress as more attention can be paid and more programs can be offered (even if there are budget cuts!)

• Improved Information – The executive director and management will be able to make more proactive decisions that result from having access to

Vertex Systems, Inc. 440 Polaris Pkwy, #150, Westerville OH 43082 866-981-2600

timelier and/or more accurate information, which leads to improved business results and productivity gains.

Payback It is very important to consider when your technology purchase will pay for itself. This is the payback calculation. It is an investment's payback period in years equal to the net investment amount divided by the average annual cash flow from the investment. Simply, it means how long it will take to get your money back. Depending on a purchase, it can be anywhere from several months to several years. For example, in nearly every industry, a company that installs electronic documenting software generally sees payback within 6 months to 2 years. Meaning that if they purchase this software, it will save them the time required to enter the data by hand. Value is created when it is no longer necessary to spend resources on that particular task. It is very important to measure your results. Putting together a ROI analysis to get the technology purchase funded is not enough. Develop measures to track the actual effectiveness of your software.

• Did you increase productivity? • Did you eliminate a staff position or re-purpose the staff member(s)? • Did you increase revenues, cash flow, and/or maximize service billing? • Did you have access to data and reports that kept you in compliance? Did

you make better business decisions based on timely and accurate data? By benchmarking and reporting on your progress after your purchase, you’ll know how effective it was. And you’ll have a better chance to add additional technology purchases because you will have results in-hand to prove it. What is the ROI of Vertex Systems’ Products?

An ROI process focuses on identifying and inspecting the benefits of efficiency and effectiveness and how these will support your agency’s mission. Your calculations should be easy to understand as well as believable to everyone involved.

Our software modules are all designed to boost performance, productivity, accuracy, communication, and valuable results from improved decision-making. There are many ways to determine the quantitative and qualitative benefits from implementing a new system that will allow you to get more done, get it done right, and be able to prove it with quality reporting.

Vertex Systems, Inc. 440 Polaris Pkwy, #150, Westerville OH 43082 866-981-2600

Here are a few examples that could kick-start your ROI strategy: Duplication of Effort

Assumptions Your staff handwrites timesheets or manually enters data into your payroll

system 2 staff earn $10 per hour at 5 hrs per week ((5x10)x2)x52 = $5,200

Automation would allow the redeployment of at least one employee = $21,000

Annual Savings

$26,200

Data Integrity Assumptions 97.5% Accuracy rate 2.5% overpaid $10,000 per week payroll cost 52 pay periods in a year Automation eliminates the chances of human error 10,000 x 2.5% x 52 = $13,000

Annual Savings

$13,000

Elimination of Manual Timecard Costs Assumptions Storing timecards, distributing timecards, manually collecting timecards, routing

for exception checking, fixing errors, and resubmitting. Automation eliminates approximately 5 hours per week spent doing the above. Assume $10 per hour. (5 x 10) x 52 = $2,600

Annual Savings

$2,600

Supervisor Timecard Review Time

Assumptions Eliminate at least one hour per week spent reviewing timesheets for 15 supervisors Assume $13.00 per hour

Vertex Systems, Inc. 440 Polaris Pkwy, #150, Westerville OH 43082 866-981-2600

13 x 1 x 52 =

Annual Savings

$676

Report Creation Assumptions 15 supervisors who create reports average 1 hour per week creating reports Assume $13.00 per hour 13 x 15 x 52 Automated reporting can be accessed immediately

Annual Savings

$10,140

Total Annual Savings

$52,616

After you have identified savings values, increases in revenue, and productivity gains, it is time for the financial calculations.

You must determine the total costs of the technology purchase, including the license or SaaS fees, maintenance and support, and implementation costs.

Subtract these total costs from the total savings and earnings to see your return. Create a written report, as formal as possible, to provide concrete proof of the IT value to your agency.

The Success of ROI

You should assemble a team that will be responsible for the success of a technology purchase to undertake this ROI process. The group should be a mix of technical and non-technical people and must include the management and executive director of your agency. You need to not only understand the tactical benefits (tangible and intangible) but the strategic value of any investment to your organization and how the investment will impact the “big picture” of the agency. This process will allow the director to plan for the future and get approval for any big purchases.

Download an Excel Spreadsheet for ROI Calculations

Vertex Systems, Inc. 440 Polaris Pkwy, #150, Westerville OH 43082 866-981-2600

For More Information – Contact:

Vertex System, Inc. 440 Polaris Parkway Suite 150 Westerville, OH 43082 Toll-Free – 866-981-2600 Email – Info@VertexSystems.com