It is important to start defining your cloud accounting software budget early on. You may be able to get some budgetary figures during your initial software research and as you begin talking with vendors. ERP products are priced using various methods, including a “per user” price, by “module” or functionality, company size, consumption, or a combination of these.
One survey done by a national ERP software research group suggests that companies spend 6.5% of their annual revenue, so that to may be inflated for a mid-size organization. In the past, ERP and accounting software was often purchased outright with a sizeable first-year investment, and then a yearly “Maintenance” cost was charged for software updates and support services. Today, many cloud accounting software programs are offered as an annual subscription, keeping first-year expenses lower.
SaaS (Software as a Service)
The amount spent on subscription-based software will also vary quite a bit in year one than in subsequent years. This is due to the cost of implementation that is typically incurred in year one. That being said, some vendors are offering different types of payment options for implementation, to reduce the upfront costs.
The benefit of SaaS and of cloud accounting software, is that upgrades, patches and IT infrastructure are included in the annual subscription cost. This means that your annual spend is more predictable. Whether it is on-premise or cloud-based subscription solutions, there will always be an annual cost to run the software. Knowing these costs upfront will help you plan down the road.
Implementation Costs - What to expect
Keep in mind as you are budgeting for a new cloud accounting software that in all likelihood, the implementation costs will exceed the software costs in the first year. It’s also important to be aware that many subscription-based programs are offering quick start standardized implementations that keep prices low. These quick start plans do not allow for company-specific setups, instead using predefined settings such as Chart of Accounts and security.
When evaluating implementation costs, be sure to get a detailed quote from the vendor of all the expenses that will be included pre and post implementation to ensure you are managing your expectations on what services are included.
In traditional on-premise environments, at least one server will be required and, in many cases, a SQL server as well. You will also have to replace your hardware every 5-7 years. With a cloud accounting solution, hardware requirements are minimal or non-existent.
There are additional intangible costs to consider when implementing a new accounting software, including the time your employees will spend involved in implementations, workflow planning, and training.