Software is an Asset, not an Expense!


I am back working in a Sales team for meat specific software solutions! I will play a role as an Industry Principal and Solution Consultant and support the team with my product and industry knowledge. During the past 2 years, I worked as an independent consultant on the ‘other side’, spending the vast majority of the time working for one of the top 5 beef packers in North America. There, as well as in lots of other encounters over the past years, I learned that software costs are widely considered and expense. Getting capital approvals for even small software projects is like pulling teeth, and the value is vastly underestimated.

To look at software as an Expense is wrong on multiple counts, most obviously from an accounting perspective. Ok, there are smaller pieces of software, such as Operating Systems and Utility software that you can straight expense, but the big chunks, the ERP, WMS, the Supply-Chain Management, the livestock payables, the cutting yields, the HACCP software and your Accounting. All of these will all be amortized over the years to come and will appear in your books as an asset, not an expense.

If you look a little more closely, you will find that good industry specific software is very similar to a piece of manufacturing equipment. Any piece of equipment is being bought because it either allows a company to do something that it otherwise could not do, or it provides economics that allow them to do something cheaper than it would be “the other way”, which mostly means labor savings, but does not exclude yield savings (in packaging and material) as well as space and energy savings among others.

This is actually what a good industry specific software does as well. Especially in meat companies, they support processes that are necessary to and either make them more reliable compared to the manual way, or they make them more efficient. A sales order process, from taking the order, checking product availability, credit limit, pricing to order-fulfillment in shipping and sales you have an at least equally important business process towards profitability of your organization than you have on your cutting department. Investing in better equipment for better yields in the deboning room can have similar impact then investment in the technology of your order process, that makes sure that you cut down on claims because of administrative mistakes, that you increase order fill-rates by committing only what can be sold and reduce on distressed sales, because you have a 100% understanding on what your inventory position is comes Monday morning.

Good meat specific software is the intellectual property that makes this things right, it is the “piece of equipment” that makes administrative and office processes better, cheaper and more reliable. It improves the yields mostly in labor hours, but also literally. Just because you don’t understand what software really does, or you cannot develop a vision on what a software can do does not mean that a software does not do anything. It does, and if it does it well enough, it can have the biggest impact on your business that you can imagine. That is just the case because you can do a lot, an almost unlimited number of things with software that you otherwise would not be able to do, some of them lie even beyond my imagination.

 

 


 

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