June 28, 2019

Keeping Up with FASB and IASB Topics, Standards, Codifications and Updates

“Accounting is the language of business…” Warren Buffett

It may not be obvious, but it’s critical for sales and other non-accounting professionals to stay current on new accounting standards, including ongoing updates issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standard Board (IASB).  Accounting standards and updates can impact corporate strategy and decision making, including how to best access, use or acquire technology, which is why we pay close attention to accounting.

First, some background on FASB and IASB.  What are these organizations?

The Financial Accounting Standards Board is a private, non-profit organization, standard-setting body whose primary purpose is to establish and improve Generally Accepted Accounting Principles (GAAP) within the United States in the public’s interest.  New standards are issued by topic and number as Accounting Standard Updates (ASU) and then finalized as Accounting Standards Codification (ASC); older standards were issued as Financial Accounting Standards (FAS), Statement of Position (SOP) modifications and few other acronyms, most of which are being superseded by new ASC standards.  All standards are refined and updated on an ongoing basis. (more…)

June 12, 2019

ROI vs NPV: What Are They and What Do They Mean?

Image of a watch with money to illustrate the "time value of money." This is a key point when looking at ROI vs NPV.
Image by TheDigitalWay from Pixabay

When deciding to buy a new technology or business asset, companies typically evaluate if that investment will “pay for itself” using financial metrics like return on investment (ROI) and net present value (NPV). ROI and NPV matter to both the buyer and seller because they are the foundation of building a business case for the investment. These metrics make it easier to compare investment options that are competing for the given capital and/or operating budgets. So, ROI vs NPV, what exactly are they and what do they tell us? (more…)

May 19, 2019

Private and White Label Vendor Finance in a Shifting Market

Significant changes in the environment have provided an opportunity for software vendors to make it easier for customers to acquire their software:

First, software license models are changing, moving from on-premises perpetual licenses to usage-based subscription models.

Vendor objectives are also changing, moving from a focus on upfront revenue recognition to recurring revenue streams.

Software accounting rules are also changing.  SOP 97-2 has been replaced by IFRS 15 and ASC 985606.

This shifting market has had a marked impact on private label software finance.  Private label financing simply means that the vendor provides the financing directly to their end users.

Changing path
Photo by Kimi Lee at Unsplash

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May 6, 2019

The Most Important Skill for Effective Value Selling

In my eight plus years at TFP, I’ve engaged in more value conversations than I care to count.  Most have gone reasonably well; at the end of the process, our value selling team—usually my client, their customer, and me—can usually produce an effective financial analysis that helps the customer understand the potential value of my client’s technology in their environment.

The occasional engagement has gone sideways.  Periodically, I look back at those conversations and wonder what I could have done differently.  In some cases it wasn’t going to end well no matter what I had tried.  It might have been a “hail Mary” ROI to rescue a floundering deal.  Or the customer wasn’t really engaged in the first place, and wasn’t willing or able to devote the time to make the process useful for anyone.

This guy would make a great value seller. Photo by kyle smith on Unsplash

 

 

 

 

 

 

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April 22, 2019

More About Capitalizing Cloud Spend

We’ve received a lot of feedback on our earlier blog on OpEx vs. CapEx treatment for cloud-based technology purchases. And we continue to encounter customers who would prefer to capitalize their cloud technology investments for the reasons mentioned in the blog post (particularly those companies, or executives, who are concerned about EBITDA).  So we’ve been looking at this more closely.

AccountingOne interesting consideration is introduced by some new IFRS (International Financial Reporting Standards) guidelines that took effect at the beginning of 2019. Of particular interest are the changes related to the IFRS 16 standard which say that going forward, virtually all leases must be treated as CapEx. Why this matters has to do with the definition of a “lease.”

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March 1, 2019

New International Lease Standard Impacts Technology Selling

On January 1st, 2019 a new lease accounting standard, IFRS 16, came into effect for all companies that report under the International Financial Reporting Standard.  Under IFRS 16, virtually all leases must be shown on a company’s balance sheet.  This can have an important impact on large technology purchases and to technology vendors who hope to make it easy for customers to buy.  Let’s explain why.

In general, leases have been of two types:  finance leases and operating leases.

Accounting for IFRS (more…)

February 18, 2019

When Presenting Deal Options, Think KIS (with One S)

My colleague, Drew Wright, wrote a piece a couple of years ago invoking both the Gene Simmons novelty-rock band and a reminder that “Keep it Simple Stupid” doesn’t always apply (like when applying discount increments).

For me, when I think about keeping it simple, I remove the last S, because none of us are stupid and keeping it simple can frankly be hard. After all, simplicity can be is the ultimate sophistication.

Too many choices
Too Many Choices
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January 31, 2019

Emerging Techniques for Value Selling the Public Cloud

Are Cloud Options Lengthening Enterprise Sales Cycles?

With a public cloud provider popping up in many technology sales, enterprises are faced with an even more complex variety of acquisition options regarding how to license, support, host and pay for the solution. How these options line up can have a significant impact on budget, short- and long-term cost, and receipt of business value. And getting your prospect to choose can have a huge impact on the sales cycle!

For the enterprise account manager, communicating the business value nuances of selling with and against the public cloud can be a key to streamlining the buyer decision making process. (more…)

December 14, 2018

Helping Your Customer Capitalize Cloud-Based Spend

In the course of working with our technology clients and their enterprise sales teams, we’ve noticed an interesting trend in the last six to twelve months.  Increasingly, I.T. buyers are expressing a preference (or sometimes a need) to be able to acquire cloud-based technology as a capital expenditure event rather than as operating spend.  That’s right, the buyer is asking for a CapEx offer vs OpEx.

CalculatorThis is contrary to the pattern of I.T. buyer behavior we’ve seen over the last several years, which has been toward buying technology with operating budget dollars rather than CapEx.  However, a recent pivot toward a desire for spending CapEx dollars shouldn’t be entirely surprising for a number of reasons.

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October 23, 2018

Helping Your Customer Back Into Software License Compliance

We live in a world of increasing complexity. In their quest to create value, enterprise customers continuously test and embrace new technologies, which come with many labels–-digital, analytics, automation, the Internet of Things, machine learning, artificial intelligence, and so on.  Software deployments now involve public clouds, private clouds, hydrid set ups, managed service providers, and/or customers’ premises.  Software licensing metrics may involve users, seats, names servers, geographies, limited timeframes, sublicensing…

As a consequence, use-rights being applied to modern IT environments have some times evolved into complex (and potentially baffling) licensing terms which has made entitlement tracking more difficult.  The risk is now higher that even simple technology refreshes will cause an enterprise to fall out of compliance.

Lock and contract (more…)