Day 26: Manage your IWMS Financials

Posted on 26 August 2009
Tags: 31 Days, Finance

One of the most important aspects of every IWMS implementation is the Financial aspect. Financial knowledge is key to every IWMS professional. In today’s post you are going to manage your IWMS finances.

Today’s teaching

Financial implications are circling around every software implementation project. Financial losses often initiate IWMS implementations in the first place. Only when organizations start to feel the financial pain of a non-optimized real estate portfolio, IWMS projects will be initiated.

Before you can even start the project, you need a budget approval and every phase of the project you’re tied to financial constraints. Therefore, you need to analyze the financial aspects of your IWMS. Below you will find a list of aspects you can evaluate.

Budget

The first financial aspect that you need to evaluate within your IWMS implementation project is the budget. The best thing to do is to start out with evaluating:

How much you have used from the initial budget.
Whether you have filed additional budget requests
How the budget was utilized. The best thing to do is to evaluate the ratio between software and services. This should be approximately about 50 / 50.

Besides evaluating what you have done in the past, you also need to plan for the future. By analyzing the budget exhaustion from the initial project you are more likely to effectively plan your budget for the next phase of the implementation project (assuming you’ve planned a phased implementation).

Contract

Most financial aspects that have been involved in your IWMS project can be retrieved from the contract you have signed with the IWMS vendor. Unfortunately, a lot of projects have not lived up to the contract therefore, you should closely read your contract.

Because evaluation of your contract is extremely important, one of the tasks of the 31 Day Challenge is to evaluate your contract with the IWMS vendor. Please ensure that you know every financial aspect of the contract as this will also assist you with your budget approval for the next phase.

In addition to these financial criteria, you should closely evaluate the Annual Maintenance part of the contract. What percentage of the software do you pay on Annual Maintenance? And more important are you entitled for upgrades and support within this Maintenance contract?

On iwmsnews.com we have published a poll about Annual Maintenance Contracts (AMC). Most IWMS vendors have an AMC between 15% and 20% of the purchased software.

Cost reduction & ROI

Most IWMS projects are initiated as a cost reduction program. However, it is hard to evaluate whether your IWMS has actually reduced the operational costs of your organization.

When your organization wants to improve profitability there are only three options:

Sell more
Spend less
Do more with the same

IWMS are used to spend less so what you need to do is to evaluate whether you have actually reduced the operational costs. There is not a lot of (scientific) literature available about the true ROI on Integrated Workplace Management Systems at the moment although studies are undertaken to research the ROI.

To determine the ROI of an IWMS you have to compare the investment of your IWMS with:

Time Reduction of FM/RE Staff
Time Reduction of other personnel
Reduction in Sq ft
Reduction in energy, water and materials consumption

Contractors and Suppliers

IWMS’s are particularly suited for evaluating the performance of contractors and suppliers. If you want to improve the financial situation of your organization (within the IWMS realm) you need to be able to monitor the performance of individual vendors. Those vendors that do not meet their SLA’s need to be replaced by other vendors. Every change is a bare, but it is better than wasting far too much money.