HR Software ROI Calculator

The HR software ROI calculator is a great tool to help you to calculate the amount of finance gained from the investment in that new company software. It considers the costs associated with your software purchase and calculates the return on investment.

Companies are constantly trying to find ways to reduce the time and cost used to complete tasks as well as the churn rate of their customers. Up-to-date software is one of the ways used to combat these issues. However, measuring software ROI is difficult since the benefits gained through software implementation are not always easy to compute in dollar amounts.

We created this calculator to help you to overcome these obstacles by putting a dollar figure to those things that may be difficult to calculate.

If you are looking to invest in new software and wish to calculate your estimated return on investment (ROI), we have you covered. On the other hand, if your company invested in new software within the last few years and you are looking to calculate the ROI for the period your software has been in use, this tool is just the one you need.

Keep reading to learn:

• What the term software ROI means;
• The formula used to calculate our HR software ROI;
• How to use our HR software ROI calculator; and
• Four reasons why you should calculate the ROI of your company's new software.

Software ROI is a value we compute to compare the benefit gained compared to the cost of the investment (the software). It gives you the percentage gained from the investment.

When a company invests in new software, it is important to calculate the ROI in order to understand whether the investment is sound or not. Additionally, software ROI may be used to weigh the cost and expected return of future investment.

To calculate software ROI, we use the following formula:

Software ROI = (Benefit of Investment - Cost of investment) / Cost of investment × 100

To be clear, we subtract the cost of your investment from the benefit to obtain your net gain.

So your team pitched you a grand idea about some software you should invest in and why it would be great for your company. However, evaluating the effect of this software on your company is also an important step even before making the purchase. This helps you to:

• Recognise the key areas where the software may help to improve your company's processes.

• It is beneficial when pitching the idea for the software purchase to investors. It allows you to put a dollar amount to the benefits that may otherwise appear to have no effect on the company's bottom line. A project is likely to get the green light if it has a significant positive impact on a company's profits.

• It is a way to measure the software's impact after a reasonable amount of time to ensure you are not losing money due to your investment.

• Calculating the HR software ROI helps the company to identify the areas where the result is not as expected. This allows adjustments to be made in order to improve performance.

After three years of use. Actual software ROI should only be calculated after the software has been in use for a while. The software ROI will be low if it is computed too early after implementation. This is because it takes time to offset the initial software cost. The ideal time frame is 3 years.

Computing ROI before purchasing new software is also a good idea.

You may use our HR software ROI calculator to either compute your software's future return on investment or the return on investment of the software you have been using for the last three years.

We have a simple version that is always available to you and a more advanced version that will only appear when you select Show an itemized breakdown of costs and benefits.

How to use the simple version of the calculator

This first calculator requires only the total of your investment and benefits. So...

1. Enter the total amount invested in the software in the field labeled: Cost of investment.
2. Enter the total gains in the field labeled: Benefit of investment.
3. Voila! You can now see the total return on your investment in the field labeled: Software ROI.

How to use the advanced version of the calculator

To use our more advanced calculator, tick the Show an itemized breakdown of costs and benefits checkbox beneath the calculator to see all the fields. The more advanced version allows you to see the breakdown of an itemized list of investments and returns related to your software purchase.

To use this calculator, use the following steps:

1. Choose the period of time for which your ROI is being calculated.

2. Next, enter the itemized costs of your software. If any of the items do not apply, enter 0.

   • First, choose whether you buy a software license (a one-time cost) or need to pay subscriptions (this may be either a monthly or yearly fee).

   • Enter the license or subscription fee, data storage costs, and the cost of any support services. You may change the time frame for any of these payments by clicking the link on the right.

   • The total cost associated with the purchase of your software should now be available.

3. Enter the costs associated with setting up the software:

   • Enter the data import, software configuration, and training costs.

   • You should now see the total set up cost.

4. Now compute the benefits associated with your software purchase. Let's start with the costs associated with improved employee performance:

   • Enter the no. of employees who use the software.

   • Enter the approximate percentage of time saved per employee in completing tasks.

   • The amount of money gained through the increased productivity has now been computed.

5. Compute the monetary value gained through decreased customer churn rate:

   • Enter the total no. of customers at the beginning of the period.

   • Input the average cost to acquire a customer.

   • The average churn rate of customers with the previous system.

   • The decreased churn rate of customers since the software was added.

   • You can now see the financial benefit from the decreased customer churn rate.

6. Calculate the amount of money gained from discontinuing the use of your old hardware and software:

   • Input the hardware cost.

   • Enter the software cost.

   • Input the maintenance fee.

   • You can now see the total hardware and software cost associated with your discontinued software and hardware. This is a gain because this is money that you are no longer required to pay out.

7. Calculate your total increased profit since making this purchase. To do this we:

   • Enter the annual sales amount before the software was purchased.

   • Input the profit margin.

   • Enter the increased profit margin since the software was purchased.

   • You can now see the actual increased profit margin since purchasing your software.

8. Enter any other benefits not covered by our software.

Once all these variables have been entered, the cost of investment and the benefit of the investment, as well as the software ROI and the average annual ROI, will be displayed.

Note: No average annual ROI is displayed if we are calculating for the first year because the ROI and the annual ROI will be the same in this instance.