In the modern information based society, failure of software systems can have significant consequences. It has been argued that increased attention to testing activities during the software development process can mitigate the probabilities of system failure after implementation. However, in order to justify investments in improved testing, the economic impacts of improper testing should be identified. In this paper, we propose a systematic approach to the evaluation of the economic impacts of software testing. The main factors affecting software testing are identified, and a computer simulation model is developed to investigate different testing scenarios. Usefulness of the suggested approach is demonstrated through several exploratory simulations. The results prove the utility of the System Dynamics modelling approach in building better understanding of the impact of software testing. Implications for software development practitioners, researchers, customers of software products and software support organisations are also discussed.