Ever wondered if there is a standardized way to determine the ROI for activity based costing implementations ? Well, there is!
SAP Value engineering has put together a little tool that calculates pthe ayback (in months), ROI, net benefit ($) and savings (time) based on a number of variables related to the investment, the organization, existing processes and cost of the software solution.
The results are rendered graphically in a little financial return dashboard. Isn’t that nice ?
Naturally every implementation is different, but the only way to bring light into the darkness of ‘hard numbers’ and ROI for cost and profit management projects is to in fact go back to the existing processes and then try to determine and valuate improvements or the enablement of previously not possible processes – in time or quality.
And of course does the calculator assume (a variable in this case actually) a certain percentage of improvement through the deployment of an activity-based approach to cost management.
The numbers might be different from project to project but there are plenty of studies out there to read up on ot find the value that might be right for you. They might vary in the extend of the improvement they report but they all are favorable. The nice thing about the calculator is that you can play with the percentages and it calculates the respective ROI.
Who knows – maybe you thought it makes a big difference if it is 3 or 5 or 7 %, only to see that even a small improvement already results in a positive ROI and that the difference between 3 or 5 or 7% is just how quickly you can realize the payback.