Is There a ‘Cloud’ in Your Accounts Receivable Department’s Future?

icon Blog on Accounts Receivable, Technology and Automation  •  posted 02/18/12

How to Accurately Calculate AR 'Cloud' Costs

Cloud computing, a catchy new name for software-as-a-service (SaaS), potentially allows for automation of credit and AR functions without a large initial IT investment of time and money. (To view “The Cloud Computing Solution for Automating AR” in the October 2011 issue of Managing Credit, Receivables & Collections: (http://www.iofm.com/article/view/the-cloud-computing-solution-for-automating-ar)

By the same token, Cloud solutions are not a silver bullet that will solve all your automation challenges. As a recent article in CFO.com puts it, “The Cloud vs. traditional on-premise computing cost argument can be clouded (so to speak) by the way organizations structure and report their IT spend.” In other words, when comparing the cost of replacing an in-house application with a Cloud equivalent, credit and AR pros need to be sure they’re comparing apples to apples.

That means comparing costs between specific applications, for example based on a per-user, per-month calculation. Your current in-house systems may already be depreciated, to take an example, meaning your true costs now consist only of software maintenance. You also need to check whether there is an early termination penalty for your existing services. Total cost of ownership (TCO) over the application’s expected lifespan must be calculated to obtain a true assessment of whether a Cloud-SaaS solution will ultimately be cheaper than your current systems.

Also, as the CFO.com article cautions, “if you need the Cloud application to talk to any other systems, you may also need to subscribe to yet another Cloud application (or hire consultants) to manage data integration, authentication, and so on.”  Exercising due diligence in calculating the full-cost profile for a Cloud system will allow you to determine whether Cloud solution promises are in fact achievable at your company.