8 Important Questions Every CFO Should Ask During an HRIS/HCM Evaluation

This guide outlines key questions for CFOs during the HCM evaluation process, including: assessing integration capabilities, payment terms, scalability, compliance, and cost management. Access OutSail's free HRIS Evaluation tools to be even more strategic in your selection process.

Brett Ungashick
OutSail HRIS Advisor
June 11, 2024
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When a CFO evaluates HRIS/HCM systems, their role extends beyond mere financial oversight. They need to ensure the selected system aligns with the company’s strategic goals and enhances overall operational efficiency. A carefully chosen HRIS/HCM can significantly impact a company’s bottom line, making it imperative for CFOs to ask the right questions during the evaluation process.

Addressing both financial and strategic concerns is crucial. CFOs must assess how well the system integrates with existing financial tools and whether it offers functionalities that support long-term business strategies. Asking about integration capabilities, customer support plans, and the potential return on investment are essential steps to making an informed decision.

The implications of selecting the right HRIS/HCM system are far-reaching. From improving back-office operations to ensuring compliance and data security, the right questions can reveal whether a system will truly meet the organization’s needs. This blog post will outline these critical questions, empowering CFOs to make choices that foster business growth and financial prudence.

What are the Payment Terms?

When negotiating an HRIS contract, clear payment terms are essential for maintaining financial predictability.

CFOs should closely examine the billing cycle. Is it monthly, quarterly, or annual? Regular and predictable payment schedules are crucial for accurate budgeting.

Another critical factor is payment methods. Options could include credit cards, bank transfers, or checks. Review any associated fees or discounts for each method.

Late payment penalties can be a significant concern. CFOs need to understand the consequences of missing a payment deadline and incorporate these potential costs into the financial planning process.

It's also important to identify any hidden fees. These could be in the form of setup costs, customization fees, or charges for additional user licenses. Having complete clarity on these can prevent unforeseen expenses.

A well-defined services agreement is vital. Ensure it specifies what services are included in the base cost and which are billed as extra.

Checklist for Payment Terms

  • Billing Cycle: Monthly, quarterly, annual?
  • Payment Methods: Credit card, bank transfer, check?
  • Penalties: Fees for late payments?
  • Hidden Fees: Setup, customization, extra licenses?
  • Services Agreement: What's included in the base cost?

In summary, clear and comprehensive payment terms can significantly aid in maintaining a stable financial environment, allowing for better resource allocation and financial forecasting.

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How do the Software Fees Change as our Organization Evolves?

When assessing an HRIS/HCM, CFOs should prioritize understanding how software fees will adjust based on company scaling, reductions, or structural changes.

Flexible Pricing Models:

It is crucial to seek out flexible pricing models that can accommodate growth without causing disproportionate cost increases. Flat-fee models may limit financial strain during periods of rapid expansion.

Scaling Up:

As the organization grows, software fees might increase. These costs can often be tied to the number of users or the volume of data managed. It’s important to inquire about tiered pricing structures that offer scalability.

Scaling Down:

When the company faces downsizing or restructuring, ensure that the software contract provides the flexibility to reduce fees accordingly. Look for vendors that offer prorated pricing based on actual usage.

Contractual Clauses:

Review contractual clauses related to cost adjustments. Understand the terms for fee escalations and whether they include automatic increases or require renegotiation.

Implementation and Support Fees:

Check if there are additional costs for implementation, training, and support as your organization evolves. Some vendors may charge extra for these services during significant organizational changes.

By focusing on these aspects, CFOs can better manage HRIS financial planning and ensure the organization's software costs remain aligned with its growth trajectory.

Learn More: See how partnering with OutSail on your HRIS evaluation - at no cost - can ensure a more successful selection

Are There Costs Associated with Integrations?

When evaluating an HRIS or HCM system, understanding the costs associated with integrations is crucial.

Integrations with third-party systems can incur both upfront and ongoing expenses. These might include initial setup fees, license costs, and maintenance fees.

Upfront Costs:

  • Setup Fees: Costs for configuring the integration.
  • License Costs: Fees for software or API usage.

Ongoing Costs:

  • Maintenance Fees: Regular updates and support.
  • Operational Costs: Resources needed for monitoring the integrations.

These expenses can vary based on the complexity of the integration and the number of systems involved.

Understanding these costs allows CFOs to make informed decisions, ensuring that the benefits of the integration outweigh the expenses. By taking a detailed look at these financial aspects, they can better budget and plan for the integration project.

What is your Compatibility with our Accounting Systems?

When evaluating an HRIS, understanding compatibility with existing financial/accounting systems like NetSuite or Sage Intacct is critical.

Integration Capabilities: The potential HRIS should integrate easily with the company's current accounting systems. This integration can save time and reduce errors in manual data entry.

Data Flow: Seamless data flow ensures accurate financial reporting. If HRIS and accounting systems are not synchronized, it can lead to discrepancies in payroll and benefits data.

HRIS Integration Costs: Consider the costs associated with integrating the new HRIS with existing systems. These costs can include software licenses, IT consultant fees, and training for staff.

Questions to Ask:

  • Can the HRIS integrate with NetSuite, Sage Intacct, or other systems used?
  • What data points can be shared between systems?
  • Are there additional fees for integration services?

By addressing these factors, companies can ensure their financial reporting remains accurate and their processes efficient.

How will you Help Manage Compliance and Risk Reduction?

When evaluating an HRIS, CFOs must consider how the system will help manage compliance with local, state, and federal regulations. A reliable HRIS should have built-in compliance features that automatically update to align with changing laws and regulations.

Compliance Monitoring: An effective HRIS should continuously monitor compliance requirements. This helps ensure that the organization adheres to the latest legal standards, avoiding penalties and fines.

Adaptability: The system must be adaptable, capable of swiftly incorporating changes in the regulatory landscape. This reduces the financial risks associated with non-compliance.

Reporting Tools: Look for HRIS solutions that offer comprehensive reporting tools. Whether it's generating reports for audits or regulatory submissions, these tools can save significant time and effort while ensuring accuracy.

Training and Updates: An HRIS should facilitate regular compliance training for employees. Automated reminders for mandatory sessions and updates to training materials can maintain a robust compliance culture within the organization.

Audit Trails: Ensure the HRIS provides detailed audit trails. These logs are crucial for tracking changes and maintaining accountability, a key component in reducing compliance-related risks.

Data Security: Verify the system’s data security measures. Compliance often includes stringent data protection requirements, so encryption, access controls, and secure data storage are essential features.

Customizability: It’s also vital for the HRIS to be customizable so it can align specifically with the organization's unique regulatory needs. This flexibility helps in addressing various industry-specific compliance requirements.

Does your System Support Strategic Planning Functions?

When evaluating an HRIS/HCM, the ability to support strategic planning functions should be a top priority. A robust system will integrate essential strategic HR functions, such as headcount planning and budgeting.

Headcount Planning
A strategic HRIS can project future headcount requirements based on company growth plans, anticipated retirements, and turnover rates. This helps align staffing levels with business objectives.

Budgeting Support
Budgeting features should allow for detailed workforce cost analysis. Look for systems that offer real-time budget vs. actual reporting to track financial performance against forecasts.

Scenario Planning
Scenario planning capabilities enable CFOs to model various business conditions and their potential impact on workforce needs. This includes simulating different headcount and compensation scenarios to inform decision-making.

Real-time Reporting
Systems should provide real-time data analytics, enabling dynamic adjustments to plans as business conditions evolve. Real-time insights help manage costs more effectively and ensure financial targets are met.

Are Training and Support Costs Fully Included?

When evaluating an HRIS (Human Resource Information System) or HCM (Human Capital Management) solution, one of the crucial questions that a CFO should ask is whether the initial pricing includes all necessary training and support.

Training Costs: Absence of clear information on initial training can lead to underestimating the actual cost. Check if the vendor provides extensive training sessions within the initial price. This might include onsite or online workshops, user manuals, and interactive tutorials.

Support Costs: Identify what level of support is provided post-implementation. There can be significant variations:

  • Basic Support: Limited to standard business hours and may not cover all needs.
  • Premium Support: Generally includes 24/7 assistance and faster response times.

Hidden Fees: Additional fees may not be apparent initially. These can include charges for:

  • Custom training programs
  • Additional user training sessions
  • Advanced support services

User Adoption and System Efficiency: Without ongoing support, user adoption rates may decline, affecting overall system efficiency. A well-trained user base is essential for maximizing the benefits of any HRIS/HCM system.

Vendor Clarifications: Ask vendors to provide a detailed breakdown of what is included in their support and training packages. This helps in budgeting accurately and avoiding any surprises down the line.

Understanding these costs ensures that your company will be prepared and fully supported, thus enabling smooth and effective utilization of the HRIS/HCM system.

Are there Future Cost Escalations?

Identifying potential future cost escalations is crucial during the HRIS/HCM evaluation process.

It's important to inquire about the cost structure after the initial contract term ends. Ask whether there are fixed rates or if there will be incremental increases. Understanding this can help in budgeting and forecasting for the coming years.

Businesses should also discuss strategies for negotiating terms that protect the organization from significant price hikes. Engage with vendors to secure long-term pricing agreements or caps on annual increases. This can mitigate the risk of unexpected budgetary pressures.

Prepare a list of specific questions:

  • Are annual increases capped?
  • Can we negotiate a multi-year term with fixed costs?
  • Are there potential costs for upgrades or additional functionalities?

Conclusion

The questions discussed are crucial for any CFO evaluating an HRIS/HCM system. They help in uncovering vital information about the system’s financial viability and long-term impact on the organization.

By utilizing this questionnaire, CFOs can:

  • Assess Cost Management: Understand the total cost of ownership, including implementation and maintenance.
  • Evaluate ROI: Determine the potential return on investment and the system’s contribution to organizational efficiency.
  • Promote Revenue Growth: Identify how the system can support strategic HR initiatives that drive growth.

A well-informed decision requires thorough investigation and strategic thinking. This tool aids CFOs in making choices that align with their company’s financial goals and future plans.

CFOs should consistently use these questions to ensure their chosen HRIS/HCM system not only meets current needs but also supports the organization’s long-term objectives.

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Meet the Author

Brett Ungashick
OutSail HRIS Advisor
Brett Ungashick, the friendly face behind OutSail, started his career at LinkedIn, selling HR software. This experience sparked an idea, leading him to create OutSail in 2018. Based in Denver, OutSail simplifies the HR software selection process, and Brett's hands-on approach has already helped over 1,000 companies, including SalesLoft, Hudl and DoorDash. He's a go-to guy for all things HR Tech, supporting companies in every industry and across 20+ countries. When he's not demystifying HR tech, you'll find Brett enjoying a round of golf or skiing down Colorado's slopes, always happy to chat about work or play.

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