10 questions when reviewing XBRL software

This post first appeared in XBRL Blog 

XBRL deployment is a long river, and you need to keep that in mind regardless if you’re focussed on the (downstream) regulatory filing and analysing components or the (upstream) ERP integration and general ledger design.

I’ve put together a list that takes into account technical, accounting, filing and investor relations. The point is not to compare software or even mention any of the brands out there. To keep this as theoretical as possible, you have to ask yourself:

  1. What is the scope of the application?
    If the application reaches right into the CFOs domain and into the enterprise system, it will have affect all parts of the business. Expect a high initial cost, but other functions like filing and internal analysis will (theoretically) be very fast and automated.If the application is for tagging financials for filing, expect low costs and quite a few players in this field.
  2. What is the format of the application?
    Is it accessible on the desktop or web-based? Does it accept CSV, PDF, HTML or your proprietary formats? This is of critical importance when it has to fit into your organisation, not your organisation having to fit around it. Check your process flows and your IT systems for compatibility.
  3. Is the vendor a thought-leader?
    If the vendor has been developing XML products for some years, and has now created an XBRL product with a tweak here and there, you may struggle with the software down the line. Check the personalities who work at the organisation, read their blogs and white papers, engage them at conferences.
  4. Is the vendor likely to be around in a couple of years?
    A tough question to ask. Perhaps their XBRL offering is simply a version of their Edgar offering. We have to accept that while some consolidation will happen in this space, we will get wanderers from the Web 2.0 world (mashups etc) with new and competitive offerings.
  5. How will future filings/creations happen?
    Either tagging starts from the beginning again, or the system has built-in logic that allows tagging to go much faster from the second time around.
  6. Does it have all the necessary tools?
    Taxonomy designers, viewers, analytical tools may appear peripheral to the actual tagging, but no successful xbrl project can occur without them. Determine if they are part of the software or if they require a seperate investment.
  7. Does the application offer support?
    You’ll likely have all kinds of questions when you begin using the product. Seperate the accounting, regulatory and business rules from the actual software and see if the company offers support for those. Don’t confuse an accounting issue with a software issue!
  8. Is an evaluation version available?
    Video demos are great for initial analysis, but they follow a script. You may have different processes or document formats, and you need to test these. Ask upfront if you can have a limited copy for 30 days.
  9. Does it match my existing resources?
    You cannot expect your accounting professionals to use software where they have to delve into the XML side of the code, or your technical staff to make decisions on line items. What works for your team and departmental career development plans should integrate with the software. Again, get an evaluation version on board.
  10. What is the cost?
    We all have different requirements and different plans. You have to ask yourself “what is xbrl worth to us?”.

I have 10 questions simply because it makes for a nice headline; please comment on the evaluation criteria you have used or are using.

About Derek

My key interests are online investor relations, websites, social media, enterprise 2.0 and intranets, and XBRL. Speak to me if you need a solution in any of these disciplines, or follow my knowledge links on this site and others. Find me on Twitter, LinkedIn or in recent conversations.