Software Contract Negotiation Tips

Negotiating software contracts is a very important part of your software selection project. The software vendor writes the contract to protect their interests in the engagement. You need to negotiate the contract to protect your interests.

Enterprise business software (ERP, HR, CRM, Financial software, etc.) contracts are typically very negotiable because the software vendors are looking to lock up a long term customer. They know that if they can get a customer in the door even at a discounted rate, they will have a long term maintenance revenue stream that should last at least 5-10 years. The reason for this is that after such a big investment, companies are reticent to change software solutions for many years. Therefore, it is important to remember that the time you have the strongest leverage with the vendor is during the negotiation before signing the contract. Make sure you use that leverage to your advantage.

There are basically 3 contracts that you will sign for a standard on-premise implementation.

1. Software License – This contract outlines the terms of use of the software. The pricing for the software license is typically set by module on a user or concurrent user basis. The software license is usually heavily discounted in the sales process so the software vendor can acquire the new customer.

2. Software Maintenance – This contract outlines the terms for support, maintenance, updates and upgrades. The cost for this service is usually an annual fee of 18-22% of the list price for the software license.

3. Implementation Services – This contract outlines the statement of work, hourly rates, and plan for the implementation. The cost for implementation services is based on the hourly rates of the implementation consultants and the estimate of hours to complete the project. A good rule of thumb for implementation cost in a mid-market environment is a 1:1 ratio with the software license cost. In other words, for every dollar of software license cost you pay, you can expect to pay a dollar for implementation services. For larger companies in more complex environments, this cost can end up being much higher – 2:1 or even up to 10:1 ratio.

If you are buying software in a Software as a Service or SaaS environment, then you will have a Service Level Agreement (SLA). This agreement includes the right to use the software as well as the hosting and data ownership clauses that will be necessary for the engagement.

A few key software contract negotiation tips to remember:

1. The software license is typically heavily discounted up front. Make sure that you look at the whole cost of the software over a 5 year period including maintenance, support, and implementation services.

2. Make sure that you define the terms of the agreement. For example, some vendors will include full payment upon software “installation.” This means that they can charge you the full cost of the software license when they come into your offices and insert the CD, even if there have been no modifications or implementation services.

3. Negotiate the statement of work before you sign the software license agreement. Make sure that you understand exactly what you are buying – including the implementation services plan.

4. Negotiate near the end of the vendor’s fiscal year or quarter end as large discounts can be negotiated so the software vendor can achieve sales goals. We have seen clients sign contracts late at night on December 31 and recently had a customer that was offered a 40% discount if they would sign by the end of the quarter.

Finally, understand that some clauses are negotiable in a software contract and some clauses are not. We recommend that you get assistance with the contract negotiation from a consultant experienced in this area. Their understanding can save you thousands of dollars and can help protect your interests in the contract.

The goal of software contract negotiation should be to have a long-term partnership with the software vendor. This means that the negotiation should not be adversarial. Instead, negotiate with the intent to reach an agreement that is a win-win for both parties for a successful relationship.

Financial Statement Basics and Presentation: The Balance Sheet

Financial Statement Basics: The Balance Sheet

The Canadian Balance Sheet shows the financial position of an entity which is why this statement is commonly referred to as ‘The Statement of Financial Position.” The first key point to note is that the balance sheet is prepared to show the company’s position at a specified single point in time (Example, as of December 31st, 20xx) whereas other financial statements such as the Income Statement are reported to show the company’s operational performance for a specified length of time such as, “for the year ended December 31st, 20xx.” In this example, the income statement is said to cover an entire year from January 1st – December 31st which is also known as a calendar year-end.

Furthermore, the balance sheet consists of three important elements to consider. It reports the balances of all assets, liabilities and equity accounts for the company. It is critical to understand the fundamental accounting equation in the preparation and presentation of the balance sheet where Assets = Liabilities + Equity.

Assets: contains all resources that the company owns at the balance sheet date. This includes both current and non-current assets that the company utilizes in order to generate future economic benefits. The most common current assets listed on the balance sheet includes cash, accounts receivable and inventory which are resources that are anticipated by management to be converted into cash within a year or the entity’s operating cycle, whichever is longer. Accounts receivable is simply the amount of money owed to the company by its customers which is generated from the sale of goods and services on account. Non-current assets, therefore, contains all resources owned by the company that have a useful life of more than one year. These assets are often referred to as Capital Assets which include equipment, buildings and land. Notice that all assets mentioned thus far whether current or non-current can be classified as Tangible Assets which contain physical substance. However, the balance sheet also presents Intangible Assets which are reported as non-current capital assets as well, since they have a useful life of more than one year but do not have any physical substance such as goodwill and patents. The sum of the current and non-current assets will equate to and be reported on the balance sheet as Total Assets of the company.
Liabilities: represents the claims against the company’s assets that have not been paid at the balance sheet date. Therefore, they are obligations to the company’s creditors. Just like assets, liabilities are subdivided into current and non-current. Accounts Payable is a frequent account that can be seen on the balance sheet and is essentially the direct opposite of the accounts receivable balance. While accounts receivable are amounts owed to the company from a customer sale on account, accounts payable are amounts owed by the company to its creditors arising from purchases on account both of which are either expected to be collected or paid typically within 30 days. Non-current liabilities represent obligations that will not be settled for more than one year or the company’s operating cycle, whichever is longer. Long-term liabilities (non-current) found on the balance sheet include long-term bank loans and notes payable. The creditor’s claims against the assets can be seen by examining the fundamental accounting equation stated above where the entity’s assets equal the creditors’ claim which represents liabilities plus the owner’s claim of the assets representing the company’s equity.
Equity: according to the fundamental accounting equation if we rearrange this to solve for equity, one can conclude that Equity = Assets – Liabilities. Upon closer examination, it can be clearly seen that equity represents the value of a business after liabilities have been reduced from the company’s assets. Often equity is referred to as the residual interest of a company. Also, it is important to note that the creditors’ claims to the assets are always settled first before the owner’s claim can be realized.
Presentation Example for the Statement of Financial Position

ABC Company (COMPANY NAME)

Statement of Financial Position

As at December 31st, 20xx

ASSETS

Current assets:

Cash $2,000

Accounts Receivable 1,000

Inventory 3,500

Supplies 500

Total Current assets $7,000

Non-Current assets:

Building $75,000

Equipment 7,000

Total Non-Current assets $82,000

TOTAL ASSETS $89,000

LIABILITIES

Current liabilities:

Accounts Payable $3,000

Wages Payable 1,500

Total Current Liabilities $4,500

Non-Current liabilities:

Lease liability 1,000

TOTAL LIABILITIES $5,500

OWNER’S EQUITY

OWNER’S NAME, Capital 83,5000

TOTAL LIABILITIES AND $89,000

OWNER’S EQUITY

The above illustrated example for the statement of financial position shows various key features. The heading indicates the name of the company, clearly indicates what type of financial statement is shown and what period it is covering. Furthermore, the statement of financial position is visual a representation of the fundamental accounting equation. The left side of the statement represents assets which is also the left side of the equation. The right side of the statement represents liabilities and owner’s equity which in turn captures the right side of the equation. As a result, the statement of financial position is perfectly balanced only when total assets equals total liabilities and owner’s equity.

After examining the above illustrated equity section of the balance sheet and noting the name of the company reporting the statement, it is important to recognize that the form of organization in this example is that of a proprietorship and not a corporation. The difference in the balance sheet reported by a proprietorship and by a corporation lies primarily within the equity section. In a proprietorship, the owner’s capital includes the initial investment in the business, net income (profits) or net loss (losses) and is reduced by any drawings (withdrawals made by the owner for personal use). However, in a corporation, these amounts are split up into two common accounts: Contributed Capital and Retained Earnings. Contributed capital also known as share capital represents the investments made by the shareholders’ of the corporation. Retained Earnings is the cumulative income/loss amounts of the corporation since inception and also includes all dividends paid out to the shareholders. Dividends are similar to drawings in that they both reduce the equity account since they are distribution of equity payments to the shareholders’ or the owner respectively.

Home Based Business Presentation Training

Putting Together An Effective Direct Selling Party Presentation

Home parties are a popular method for selling a wide variety of products. No matter what type of product you are distributing there’s an audience for it out there. Presentation is the key. When you gather people in one room to show them products you wish for them to purchase you need to make sure your presentation is effective.

Direct sales party plan is a lucrative business that has provided many individuals with cash flow. As with any other type of business much planning should go into the presentation. This is what will determine whether or not attendees are interested in the products and business as a whole. You want your host to have a successful evening and showing her how to present her products in an engaging manner will go a long way toward promoting the overall business.

Home Party Plan Business Presentation Help

Most party planning companies use the presentation style because when implemented correctly, it is a very successful means of distributing products. This has not wavered over the years. The best marketing for direct selling party professionals is to take the time to plan your presentation. A good presentation requires proper planning.

When the party is planned, a specific time is set, signifying when it will begin. You will want to encourage your hosts to leave some extra time open in case some guests arrive late.

Once the guests have arrived they will be presented with the products. The best way to do this is to demonstrate each one. This demonstration will take place in front of a captivated audience instead of each individual person. The guests will then be given time to physically examine the products and can ask questions. Show your host how to properly demonstrate each product in a way that shows off each feature to its fullest advantage. Remember, you may want to sell these products right there on the spot so selling is everything. If your host does not choose to sell products on the spot, she at least needs to have catalogs handy so people can order them.

Catalogs also add to the overall product presentation. Let’s say, for instance, the host does not sell products at the party, but instead demonstrates them and then passes around catalogs. Guests will find the products in the catalogs that interested them, but will also likely see other items they wish to purchase along the way. This will not only help to sell the products that were presented but will raise questions about others which may equal more sales in the end.

Depending on the types of products you represent, your host may have samples to hand out. This is always a good idea where relevant because it enables guests to try products. Once they have had time to take the samples home, along with a catalog of course, they can place subsequent orders. Teach your host techniques for selling each product in an indirect way as it is demonstrated. For example, if there is a sample for a particular product, she could hand it out upon talking about the product itself. This, too, will go a long way toward future sales.