Off Topic -- Accounting for Expense Reductions
I'm asking this here because the thread it applies to gets little or no traffic, and many people here seem willing to answer questions.
I follow a software company whose product lowers the cost of doing business for it's customers, which are generally mid to large sized manufacturing companies. It usually costs 1-3 million to implement, but in the press releases, the customers predict that it will pay for itself within 3 or 6 months (depending on the customer).
So, if it pays for itself within 3 months, should I expect that 1-3 million to fall to the bottom line the next quarter? Does the effect of the savings only effect that next quarter, and is then discounted by the street, or does it compound as time goes on?
Obviously, if they achieve such savings, they may be great investments. I just need to make sure I know how to come up with an expected value.
Thanks in advance,
Pete |
