Choosing the right accounting software can be tough. With so many options and so much technical jargon, finding the package that meets your needs is quite a challenge. But once you have found the software that has the right functionality for your business, you need to make sure you understand the costs. There are ways to save money or to waste money; there are upfront costs to consider and hidden costs to avoid.
But you can be an informed buyer. It is important to understand that the total cost of an on-premise accounting software project will include three components: software licenses, implementation services, and hardware. In this article we will focus on software licenses. Here are nine questions that every accounting software buyer should ask before signing on the dotted line.
1. Is the system priced per user or per module?
Software that is sold under a user based pricing model will require you to pay one license fee per user. This includes access to all the modules of the system which you can turn on or offer to each user based on security. On the other hand, software that is sold as a module based pricing model will require you to buy the specific modules that you need (such as general ledger) on an a la carte basis.
If you only need a limited amount of functionally now and in the future, buying a module based system will usually save you money. However, module based pricing will limit the scalability of your ERP system. For many companies, user-based pricing is often a better value and a better investment – you get more for your money and room to grow.
2. Can you buy full user and light user licenses?
Once you’ve decided on the pricing module, you’ll need to decide how to define user. Let’s say you have 20 people in your company. Five of those people work in the finance department and need full time access to your ERP system. The rest of the company just needs to view data and run reports. If the software you choose gives you an option to purchase full user licenses and light user licenses, this can be a substantial cost savings for those additional 15 users.
3. Is the system priced by concurrent users or named users?
Following the scenario above, if you have 20 people in your company that need some type of access to the software, do they each need their own license? If you buy a system based on concurrent users, you can set everyone up in the system. However, you only need to buy licenses for the maximum number of people who will access the system at the same time. Often this is less than the total number of users and will save you money. If you pay by named user, however, you’ll have to buy a license for each user.
4. How easy is it to upgrade your ERP system?
If you have the option to buy the basic edition and easily migrate to the advanced version later, then it makes sense to buy only the functionality you need right away. This way your system list cost will be lower. You will also pay a lower annual maintenance fee until the time comes to add features to your system.
5. What are the required annual maintenance fees?
Just about every software vendor will require you to pay an annual fee based on a percentage of the software list price. You need to ask how these fees are calculated and how long you will be required to pay them. Negotiating your maintenance contract can be tricky business and is too complicated to go into depth here. Instead, we’ll refer you to this post on maintenance contracts.
6. What is included in the annual maintenance fees?
Equally as important is what is included in the maintenance fees. The main value of a maintenance plan is the ability to get new versions of the software as it is released. But there are also be other benefits such as included support calls and free online training which you can factor into your budget as savings. For example, if you have someone in your company who can research fixes on a customer portal or knowledge base, you can save money on simple support requests. Customers who are active on a maintenance plan are also often eligible for promotions, investment credits and other perks.
7. What are the rules for lapsed maintenance fees?
After a major update is released and installed you may feel tempted to let your maintenance plan lapse until the next release. However, you should consider the repercussions this could have later. Will you still be eligible for promotions? Will you still be able to receive technical support? Will you receive needed patches and updates (such as payroll and tax updates)? Maintenance plans are like insurance, we all wish we didn’t have to pay for it, but when we need it we’re glad we have it.
8. Is there a strong ISV/Add-On community?
Many products, especially from the large established software vendors, are supported by a network of independent software vendors that offer add on features to the core system. Often these add on products can help save you money by eliminating the need for costly customization. Or you may be able to purchase the Basic edition of the software and supplement any missing functionality with lower priced add-on modules.
9. Is there a strong user community?
Again, this is a point in favor of buying from an established vendor with a large install base. When users get together, either at events or in online communities, they bring together a wealth of information. A strong user community offers an opportunity to share ideas and learn best practices. Additionally, you can get free support advice, training tips, and more.
If you know the answers to these questions then you are an informed ERP/accounting software buyer. You can more easily compare quotes between vendors and feel confident that you understand what you will get for your money.
What’s your experience with software licenses? Please feel free to leave a comment below.
Thumbnail image created by juhansonin.