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Software Financing Considerations

Software Financing Considerations

3/26/2016

ERP Software Upgrades
Minimize the Impact on Cash Flow During Long Implementation Period

While many organizations invest regularly to expand and maintain their offices, keeping technology current requires a large commitment that can be challenging. Software systems, in particular, pose a challenge for institutions due to the large, upfront costs and constant maintenance required.  However, keeping pace with technological advances is critical in business today. 

By designing a funding solution that addresses the short-term budget constraints caused by a long and costly implementation process, an ERP software system can be an affordable investment to enhance an organization’s internal operations.   

A modernized software system enables many advantages:

  • Improved communication and reporting across departments
  • Automation of routine tasks
  • Increased processing speed
  • Reduced reliance on paper-based information
  • Improved reliability + reduced ongoing maintenance issues
  • Cloud-based mobility + accessibility 

Budgeting Challenges

Did you know that you could finance the large, upfront and unpredictable costs for new ERP system implementations into fixed, predictable monthly payments that are spread out over time? This scenario means that you will encounter fewer surprises in your budget and show better cash flow overall.

Software upgrades are essential to an organization’s continued growth and success.  An ERP system is the central backbone of the organization’s systems, and can therefore make or break its internal operations.  

One university had been using the same ERP platform for 15 years.  They had repeatedly patched the nearly obsolete system to keep it functioning, but recognized that it was operating at a minimum capacity.  Couple those challenges with aggressive growth, and the situation became critical.  

The university selected a new system – which came with a $15 million price tag.  The school knew that the upfront implementation costs could be a deal-breaker.  Beyond that, an additional $6.1 million in implementation costs would need to be added to ensure support, data mapping and proper conversion. 

Financing options for this type of structure can be a challenge, and a standard loan was just not a viable solution.  The university had an ongoing relationship with First American Equipment Finance.  First American had financed facilities improvements, build-outs, and technology refresh projects for the university in the past.

The upfront implementation cost of $6 million was financed in two phases and financed over 54 months, with low, interest-only payments due for the first 15 months of each phase.  This solution was key for the university, as they were being billed based on the percentage of completion, which routinely varied.  The First American solution removed any budget unpredictability.

Comments
a10
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11/26/2016 7:22:25 AM

It's amazing how so much can be done with such information. Was scrolling through your blog and it really caught my attention. I had to save it to read later. Kudos for collating great insights at one place. Thanks!
10/14/2016 8:30:10 AM

Nice article.


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4/15/2016 6:31:17 AM

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