Tag Archives: ERP

The Secret Cost of Not Implementing an ERP System Revealed

While the cost of implementing an ERP solution can be scoped out, it’s the cost of NOT implementing an ERP that you should be worrying about.

What do we mean by that?

Using your outdated ERP software, basic accounting package or running your business on spreadsheets can be a dangerous business. In this post, we are going to review the key reasons why the cost of not implementing an ERP system should be top of mind for your organisation.

Why the cost of not implementing an ERP solution should be part of your ERP ROI equation

Companies often ask, “what will my Return on Investment be when implementing an ERP solution?”

There are multiple different methods for calculating ROI including:

Increased cash flow
Staff retention
Better customer satisfaction

An often overlooked calculation and discussion is ‘what is the cost of doing nothing?’ When companies go to the market to find and implement a new ERP solution they do so for a number of reasons:

Islands of information – multiple solutions that are not integrated. This creates risk associated with separate silos of data and information. It becomes difficult to get a consolidated view of operations.
Reporting – manual or limited reporting options in legacy systems is often cited as a reason for considering a new ERP solution
Support – companies using an older ERP application have concerns associated with business continuity and support
Company growth – high growth companies outgrow their existing ERP solutions and go to the market to implement an ERP solution to cater for and assist with rapid growth.
New technology – wanting to make the most of technological advancements (mobility, cloud and big data analytics are a few examples).

Other key reasons for implementing an ERP system include things like functionality requirements, legacy systems and more.

From our experience in assisting Australian organisations chose and implement ERP solutions, we found out that:

When first entering the market for an ERP solution companies underestimate the budgetary requirements and the work required to implement ERP. This leads to organisations deciding to “do nothing”.
When companies make no decision (do nothing), they regret the decision and re-enter the market for ERP soon after making an initial decision to do nothing.

The question to be answered is “when it comes to ERP – what is the cost of doing nothing?”

The answer to this question will depend on your company’s current systems, growth patterns, geographies and plans. Consider the following scenarios:

1 – Considering ERP because of high growth and the fact that your business has outgrown your current solutions

Companies in this scenario often delay implementing an ERP solution because they are so busy growing their business that they can’t take the time to implement a new solution. This is a false economy.

As your business continues to grow your requirements for better reporting, faster decision making and a more holistic view of operations will increase exponentially. The longer you leave it, the worse the situation will become. The best-run organisations I have seen implement ERP ahead of the curve – before the business grows to a point where the business is desperate and crying out for better systems.

2 – Wanting better support for your ERP solution

Poor or limited options for your ERP support will put your business at risk. There are two elements to this – day-to-day business continuity and missing out on the advantages of a well-supported, modern solution. Business continuity is easy to quantify – not having a good support process and structure in place is like not having an insurance policy for your business.

You might not need the ERP support for many months or even years but, when something goes wrong you could put your entire business at risk. Remember that your ERP solution controls your debtors, customer relationships, suppliers, staff and more – ERP runs your entire business. Even if you do not have a major system failure that requires urgent support think of the day-to-day costs to your business of not having an ERP partner that you can trust to help streamline your operations. A good ERP support partner will be able to offer new technology enhancements, streamlining operations and financials and helping save time and money through the use of technology.

3 – Moving away from islands of information

As businesses grow so to do the number of systems that they use internally. Think of the core accounting system and multiple third-party solutions for CRM, manufacturing, estimating, reporting and more. As your business grows so to do the requirements for information to make faster, better decisions. Growing product ranges, new geographies and additional staff add to these complexities. The more your business grows the more you will want a single source of truth – one single ERP solution that consolidates information across all business units.

4 – You require better reporting for decision making

Modern ERP solutions offer integrated reporting platforms. Integrated KPI, dashboard and analytics to analyse large data volumes is only part of the picture. Modern reporting and analytics including in-memory technology allows two very important advantages –

Sorting through large data volumes to deliver instant reporting
Automated reporting – pre-written data analytics to allow users to write their own reports without the need for advanced technical knowledge or experience.

Delay implementing a modern ERP solution and you will almost certainly not have access to modern reporting platforms for instant decision making.

5 – Technology changes – take advantage of IT

Technology is advancing at a rapid pace – faster than ever before. Modern ERP solutions take advantage of these advances. Think of recent ERP developments including:

Cloud
Big data analytics
Mobility
In-memory technology

If you want to take advantage of these and other developments in technology you will need to act and implement a modern ERP solution.

6 – Missed opportunities

Modern businesses are changing the way they do business – at an ever-increasing rate of change. Marketing, sales, reporting, logistics and manufacturing are all evolving as technology advances. If you don’t implement modern platforms for the change you risk missing out on new opportunities. After all, you don’t implement an ERP solution purely for the new technology. You implement new systems for the advantages that the solution can deliver. Once again, think about:

Improved cash flow
Better customer service
Staff retention

Conclusion

While the cost of implementing an ERP solution can be scoped out, it’s the cost of NOT implementing an ERP that you should be worrying about. The reason is simple.

For growing businesses, using basic management technology may result in performance issues with clear repercussions on operations and cash flow. in addition, poor or limited support options for your outdated technology can really put your business at risk.

Consolidating your dispersed technology systems into one ERP platform can also help your business overcome information asymmetry and reporting/forecasting challenges, giving you the tools you need to gain a 360-degree view of your operations.

To find out more about how we can help your organisation leverage Enterprise Resource Planning call 1300 045 046 or email [email protected].

12 Factors Influencing The Cost of Your ERP Implementation

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Over the past 12 years we have seen ERP solutions (designed for small to medium business) implemented in anything from one month to one year or longer. Investments range from $20,000 to multiple millions dollars for implementations that we have personally been involved in.

With this in mind, we can certainly bring you some valuable insights into how to keep the cost of your ERP implementation under control. Follow this 12-step infographic to get a better understanding of what the key factors are and possible ways to optimise the cost and get a better ROI.

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8 Reasons You Need Internal “Muscle” To Implement An ERP Solution

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Businesses looking to implement an ERP solution may or may not be aware of the many different aspects to consider in order to ensure successful delivery.

I have written many articles on the reasons for the success and failure of ERP projects.

I have included an analysis of Cloud vs On-premise ERP and several other considerations. For small to medium-sized businesses there is one, not often discussed factor, which jumps out at me when we debate the success of ERP projects.

Internal “muscle” required to implement an ERP solution

Here is what I mean by internal “muscle”. Every business will need the following internal resources allocated to the ERP implementation project to complement the efforts of your ERP development partner:

Internal accounting skills
Internal project management
Availability of company resource
Company sponsorship from C-level executives

If you are a small to medium-sized business and you want to move off your entry-level accounting solution to an ERP solution then consider your internal resource and capacity as an important factor to ensure a positive ERP Return on Investment.

To clarify – I am not talking about large business ERP implementations. I am referring to smaller businesses embarking on their first ERP project. These projects typically take 4-6 months to implement.

The point to be made is not that you require teams of people to implement an entry-level ERP solution. The point is that you can’t allocate any internal resource to an ERP implementation.

Most small to medium-sized businesses will not be able to allocate full-time resources to the ERP project. In most cases, a financial controller is doubling up as a project manager or superuser for the duration of the ERP implementation. For smaller ERP implementations, this works.

What does not work is either the allocation of no internal resource (part-time or otherwise) to the project or the implementation of ERP without internal systems, processes and the right people. You can’t expect to successfully implement an ERP solution if you don’t have proper internal processes and people.

For example, if your business does not have an internal accountant with the skill set to work with an ERP team and articulate what the chart of accounts should look like then you might be heading for trouble. The setup of the chart of accounts is only one simple example of a challenge that you will face if you don’t have the required internal skill set to implement an ERP solution.

Let’s focus our attention on what is required to successfully implement an ERP solution

A full-time, internal, accountant. If you do not have the services of a full-time accountant to do your internal accounting, then you are most likely not ready for a full ERP implementation.

Business process mapping. If you are embarking on the implementation of an ERP solution you should have already mapped out your business processes. There is very little point in implementing an ERP solution if you don’t have your internal processes mapped out and formalized.

Access to internal resources for the ERP implementation. If you are implementing an ERP solution it is highly likely that you will use the services of an ERP reseller or implementation partner. The company that you choose will have responsibility for the overall implementation of the ERP solution. However, there is a responsibility on you, the customer, to be involved at every step of the way. This requires resources and time.

Super users. Every well-implemented ERP solution needs internal “super users” to keep the system running fluently. These super users take responsibility for basic admin tasks, first-line user assistance and training.

Data. You will need to get deeply involved in your ERP implementation data conversion process. This takes time (and knowledge of your data). Think of the time taken to export data from legacy systems, change data formats, test data after upload and reconcile with legacy data. Even with a lot of assistance from your ERP partner, you will need time and people to make these changes happen.

Train the trainer. Most ERP resellers are going to want to train the senior team members in your organization and then ask that these super users train other team members.

User acceptance testing. A critically important part of any ERP implementation. You will need to develop (together with your ERP implementation partner) test scripts. There will need to be a format for testing, the time assigned to conducting UAT and checking the results.

Project management. Even with Project Management provided by your ERP implementation partner you will need to provide your own internal Project Management resources. These internal resources will be required to deliver internal Project Management, communication and structure between your organisation and the ERP implementation partner.

Conclusion

Leverage Technologies have worked on ERP implementations since 2005 and delivered solutions to more than 250 clients around Australia. From our experience, every project requires internal work from the business to ensure successful delivery.

The amount of “internal muscle” that you need to deliver an ERP project will depend on the size and complexity of the implementation.

Another factor will be budget. If you are willing to spend the money a lot of the above-mentioned tasks can be outsourced to your ERP implementation partner.

Have we missed something? Let us know in the comments below!

Cloud ERP vs On-premise ERP: Solving The Great Business Debate

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Cloud ERP vs On-Premise ERP, which is the better option for my business?

As we have learned from many years of implementing such solutions, there is no single right or wrong answer to the Cloud vs On-Premise debate for Enterprise Resource Planning systems.

We have implemented Cloud, Hosted, Private Cloud and On-Premise solutions since 2005 and we want to help organisations better understand the pros and cons of each solution. Much has been written about the benefits of Cloud vs On-Premise and we want to give our own view with particular focus on ERP systems.

This blog has been written to help educate organisations on some of the questions to ask that might help you with your Cloud ERP vs On-Premise ERP dilemma.

Why Cloud is becoming the new normal

There has been very strong acceptance of Cloud-based solutions for CRM (Customer Relationship Management), Office automation (Microsoft Office 365) and mobility tools.

The acceptance of ERP solutions in the cloud has been a little slower. Why?

Because potential cloud based Enterprise Resource Planning adopters have been concerned about data, privacy and security.

There was a mindset that said “I don’t want my debtors book exposed to the internet / cloud”. Most of that anxiety has gone away over the past few years as the uptake of cloud based ERP solutions by businesses has increased.

Companies have realised that their cloud deployment is no more or less exposed to the outside world than an on premise solution (with remote connectivity).

As a result of these changes most companies evaluating ERP solutions will be considering cloud and on-premise as a deployment option.

The question that we are often asked is “which is the best option for my business? Cloud ERP or on-premise ERP?”.

The Cloud ERP vs On-Premise ERP decision comes down to this

Before deciding which is the correct option for your business ask yourself these questions:

Cash flow – Am I more comfortable with an upfront investment or monthly payments. Not having to outlay large sums of money upfront for software, hardware and infrastructure helps ease some cash flow pains. One cautionary note – paying for cloud software and services is an on-going commitment – monthly or annually for the lifetime of the software. This is an important aspect to consider when evaluating the target ERP Return on investment for your business.

Internet – Like it or not any Cloud based solution that you use will require fast, reliable internet. If you can’t get a fast, reliable internet connection then an On-premise solution is for you.

Geography – Remote offices can sometimes struggle for a decent internet connection. Multiple geographies and different office locations does however lend itself to a cloud deployment. One of the major advantages of Cloud ERP is that you can add new users, offices and sites with ease. Tell your Cloud provider you need additional users and you are immediately up and running – no server, infrastructure or hardware configuration required.

Infrastructure – An On-Premise solution requires hardware, routers, back-up solutions and infrastructure. With a Cloud based ERP solution that infrastructure is taken care of and is constantly updated.

Tax – The treatment for tax purposes of an upfront software purchase (asset) is usually quite different to the tax treatment of monthly “operating cost” invoices for Cloud. Consult your external accountants or tax advisors for more information in this regard.

Capex vs Opex – As detailed in the tax section above. As a business you will need to decide whether the Capex (asset purchase model) or the Opex (monthly pay as you go) is better suited to your business. Factors like cash flow, depreciation deductions, balance sheet review, investor perception should all be considered.

Functional requirements – Yes, even your functional requirements should be part of the Cloud ERP vs On-Premise ERP debate. Cloud lends itself to faster, easier deployment of ERP solutions. If you have extensive integration and development requirements your business might be better suited to an On-Premise ERP deployment. At the very least, if you have complex functional requirements and you are planning a true Cloud deployment of ERP, ask your ERP vendor or reseller how upgrades will work to ensure continuity of service during a generic Cloud upgrade across a highly customized solution. I am not suggesting that Cloud based ERP solutions can’t be customized – quite the opposite. True Cloud solutions tend to use the latest technology across operating system, database and mobility. As a result Cloud based ERP solutions tend to be easily customizable. The challenge is when you have extensive development and integration (see note below).

Development and integration – The nature and scope of your development and integration work should be considered. A true Cloud solution lends itself to a standard ERP implementation (the less development and integration required the better). Standardisation and repeatability are key for a true Cloud solution. The more standard the solution, the easier the role out and the less disruptive the standard solution updates and upgrades.

Users – The number of users and the pace at which you add (or deduct) users should be considered. Cloud solutions lend themselves to the ability to easily and quickly add or deduct users from the solution – the true “pay as you go” model.

3rd party solutions – If you want to add 3^rd party solutions to your Cloud deployment of ERP solutions you will need to ensure that these 3^rd party solutions are available in the Cloud and are compatible with your Cloud deployment of your chosen ERP solution.

ERP Upgrades – In a true Cloud environment the ERP Cloud provider takes care of all upgrades. The Cloud provider does a staged or full upgrade to all systems at a certain time.

Conclusion

After having implemented ERP solutions for many years we have learned that the Cloud ERP vs On-Premise ERP decision comes down to a understanding your specific business requirements and propensity to adopt two distinct technology adoption models.

On one side you have your monthly ongoing “pay as you go” model, the Cloud ERP option. Here, the reduced upfront cost and included ERP maintenance are the main advantages.

On the opposite side you have your On-Premise ERP deployment. In this instance the ERP software and infrastructure resides at your office location and you own all the related setup and ongoing maintenance tasks.

In conclusion, our key advise for choosing between Cloud ERP vs On-Premise ERP is to ask lots of questions, get the right answers and then decide which options are best for your business.

Have we missed anything? Let us know in the comments below!

Using ERP Technology as an Enabler for Better Business Outcomes

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In the new world of ERP technology, business management solutions, cloud computing and mobility the outcomes that we are expecting from our ERP implementation need to be re-evaluated.

The outcomes that we expect are driven by technology and the fact that the deployment of technology is becoming quicker, easier and more relevant for SMEs.

Think of Cloud technology, mobility, analytics and other easily integrated functionality to increase your ERP deployment footprint.

What this means to your business?

You should be expecting more value for less investment – a quicker Return on Investment.

This is due to 3 key changes that we have seen in the market over the past five years:

Technology is advancing at an ever-increasing pace
Technology pricing and platforms are increasingly becoming available for SMEs – at a price point that SMEs can afford
ERP solutions are becoming easier to deploy.

Measuring the business outcomes of your ERP technology investment

The key with good ERP implementations is to ensure that these technological enhancements result in actual business benefits. Looking at your ERP Software return on investment you will most likely measure four key indicators:

Customer satisfaction
Cash flow improvements
Staff retention
Decision making tools and analytics

These four indicators referred to above are the typical KPIs that are assessed after the implementation of an ERP solution.

Here’s the heart of the matter – we should not be implementing technology for the pure sake of it.

We implement technology to make a difference by increasing customer satisfaction, improving quote to cash timeframes and the associated cash flow, keeping staff happy through easy to use systems that give staff the ability to do their jobs in less time and the all-important information when and where we want it – for better, timely decision making.

The key is to ensure that you view the ERP technology enhancements as an enabler to doing better, smarter and more efficient business.

Let’s look at an example – mobility.

Everyone is talking about the advantages of mobility for their business. The key is ensuring that we use this technology to enhance our business and achieve the desired outcomes. Let’s start by asking the question – where can mobility help improve your business?

4 areas where mobility can help improve your business

Sales / CRM – providing relevant data for sales people. Mobility devices can provide quick, easy access to customer and sales relevant information for sales people when and where they want their information. Most sales people spend a lot of time travelling to and from customer sites. Provide your sales team with the ERP and CRM technology to be able to review customer orders, customer status, customer history and pricing from their smartphone or tablet.
Mobile order taking – if a salesperson was to take on order from a customer whilst out in the field why not automate the entire process through ERP mobility. A salesperson should be able to check customer pricing, stock availability and delivery times from a mobility device whilst talking to the customer before placing the order. The order should be automatically checked for credit limits before creating a pick list in the warehouse. This use of ERP technology provides great service improvements for your customers and reduces the time from quote to cash to help improve your cash flow. Another smart use of ERP technology to help improve your bottom line.
Service requests and requirements – if your business has a service component associated with warranty or service contracts then you will, without doubt, understand the advantages that a truly mobile ERP / service component can add to the business. Service technicians should be able to schedule their day, receive updated service requests, book out stock, track labour billing (timesheets) and get the customer to authorise the job and job completion from their mobile phone, tablet or notebook. Saving time, saving money and providing better customer service should be the desired outcomes.
Reporting – on the move and want to access your analytics, dashboards and KPI’s when and where you want? Most reporting solutions are totally mobile – use your spare time at the airport or on the morning train to get an up to date picture of your sales.

Conclusion

As technology advances and users deploy and embrace cloud, mobility and e-commerce we will continue to increase our return on investment through quicker deployments, less upfront investment and increased returns.

This has evolved at a fast pace over the last few years and we see this trend continue and even ramp as new technology innovations enter the market.

Have we missed something? Let us know in the comments below!

4 Tips to Avoid ERP Budget Overrun Nightmares

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If you are considering implementing an ERP solution you might be asking yourself which are the major implementation risk areas that might lead to ERP budget overrun?

After all, you will have a budget and you will want to stick to it!

The board of directors approves a budget for software / cloud, implementation and on-going support. As the project manager or project sponsor you do not want to ask for more budget to complete the ERP project. At the same time you can’t risk to incur in a dramatic ERP implementation failure.

Imagine the scenario – the project scope has not changed but you need an extra 20% of the original budget allocation to complete the job – not a great scenario!

Here is how to avoid it…

Keep an eye out for this 4 high-risk ERP budget overrun areas

There are multiple elements to managing an ERP implementation and the associated implementation budget.

It all starts with having a realistic budget, good internal processes, a solid implementation methodology and the right resources (internal and ERP implementation partner).

Assuming you get all of these elements right, what can go wrong?

Let’s consider the four areas that typically have the highest risk of ERP budget overrun.

Data Conversion

Very often the most under-quoted part of an ERP implementation.

The challenge with data conversion is two fold – the amount of time that your ERP implementation partner has to spend on data import and reconciliation and the amount of time that your internal resource has to spend on data preparation, testing and data “confirmation”.

It’s never as easy as clicking the button and your data appears in the new ERP system.

Items that influence the ERP budget include

The number of different data sources
Current data formats
How “clean” is existing data
The amount of data to be converted
How well your internal team understand the data formats
What, if any, historical data is being converted.

The process should look something like this:

Decide on the data to be converted (master data, transactional and historical)
Use data templates to upload data into the new system
Export data in text format from existing systems
Perform test uploads
Do user acceptance testing, check the results, reconcile.

How to avoid ERP Budget overrun due to poor data conversion management

Depending on the outcomes of the test uploads you might perform additional testing before your final go live data conversion. If your business uses inventory then a stock take at go live is recommended.

To keep control of the data conversion budget make sure that you spend some time planning the conversion requirements during the scoping process. Allocate sufficient resource to testing.

Reporting

Yes, most modern ERP solutions offer standard reports and the ability to write your own reports but, you can’t underestimate the importance of specifying your reporting requirements and containing the scope and budget associated with report writing.

It is a great shame that so many ERP implementations fall short when it comes to true value add reporting, dashboards and KPIs.

The reason very often is either:

A lack of budget allocation to reporting
Assuming that the standard reports will suffice or
Not specifying your reporting requirements.

Avoiding ERP budget overrun

In summary, when it comes to reporting make sure that you specify your requirements, define the scope, allocate budget and “ring fence” the spending.

Most importantly do not assume that reports will be standard out the box and don’t assume that you can write your own reports.

I will add that most modern ERP solutions are now incorporating better, easier to use report writing tools that have pre-written data flows to allow users to create their own report selections and configurations. This is making life somewhat easier for reporting.

Integrations

Looking to integrate your ERP solution with a third party application?

E-commerce
billing engine
In-house solutions

Integration work can overrun substantially if not correctly scoped and managed.

Avoiding ERP Budget overrun

A well defined scope, careful project management and realistic budget and timing expectations will help.

Work closely with your ERP implementation partner upfront to scope in details all the integrations with third party platforms your new ERP system will have.

Development

Very similar to integration requirements, development work can be a source of major frustration for implementation teams and Project Managers.

Think of the steps involved to complete a development inside the ERP application:

Functional scope
Blueprint
Technical scope
Development
User acceptance testing
User training
Deployment
Go live
Go live assistance
Handover to support.

Development projects should be managed as their own “mini projects” within the broader project framework.

The challenge with regards to development and project overruns is that many development projects are a blank canvas – tell me what you want me to build and I will build it for you. As a result, there is a substantial reliance on getting the scope of works correct.

If not contained within a scope the development team will continue building and developing with no end in sight.

Avoiding ERP Budget overrun

The key to budget containment within a development framework is:

Careful scope (both functional and technical)
Comprehensive project management
Clear communication between client, functional consultants and development team
Realistic budget and timelines.

Conclusion

Technology is improving.

Cloud, mobility, analytics and other technological advancements dictate that customers want more value for money.

Careful management of an ERP project can deliver on time, real value to your business. Plan, co-ordinate and structure your project to manage all aspects of the implementation with specific attention on the data conversion, integration, development and reporting to guarantee an “on budget and on time” implementation.

Have we missed something?

Let us know in the comments below! What are other areas of your ERP implementation project you are particularly considered about to avoid budget overruns?

Measuring ERP Return on Investment (ROI) – A How-To Guide for Business

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Considering implementing an ERP solution and wondering how to measure the ERP Return on Investment (ROI)?

With so many different perspectives on how to calculate the Return on Investment of an ERP solution, we thought we would give our own view on the topic.

In the last 12 years we have been involved in more than 240 ERP implementations of various size and complexity. A common question we are often often asked is;

“how do I ensure that I get the ERP Return on Investment and how do I measure it (with specific reference to my ERP implementation)?”

In this day and age most CFOs will want the ERP committee to justify the budget allocated to an ERP project by showing the Return on Investment.

The two main components to the ERP Return on Investment calculation

Required investment – what will the ERP project cost, fully implemented.
Savings, efficiencies and goodwill – gained through the implementation.

Let’s start by considering the required investment.

How to calculate the investment required to implement an ERP system

There are multiple components that make up the total investment picture for an ERP project.

When considering ERP Return on Investment, we suggest that you consider a five year budget that covers the initial investment and the total cost of ownership over the five year window. Items to consider:

Software – one off investment in a perpetual license or monthly SAAS or monthly cloud fees.

Annual maintenance and support – annual costs for access to help desk / support.

Upgrade investment – most vendors will provide at least one major system upgrade per year. The costs associated with this upgrade will vary based on whether or not your ERP solution is on premise or cloud based. Costs to consider include any investment required in the new software version – most software providers will make new versions of the software available providing you are current on annual maintenance and support – or your SAAS / Cloud investment.

Consultancy investment required to implement annual upgrades to the latest version. Once again these costs will vary based on you choice of on premise vs cloud. Each new version or system update will require an investment in consultancy time to implement the upgrade, user acceptance testing, training users in new functionality and support.

Initial system implementation – a substantial portion of your upfront investment in ERP will be allocated to the initial implementation project.

There are multiple different methodologies that can be used to implement an ERP solution. Whichever methodology you use you will want to work to an implementation budget.

This ERP implementation budget will include at least the following:

Software installation (not required in a public cloud environment);
Project Management Scope of Works / System Blueprint Scope of Works documentation;
System configuration;
Forms set-up;
Reporting configuration;
User training;
Super user / admin training;
Data conversion – test and live Integration / development;
User acceptance testing;
Go live preparation;
Go live;
Post go live support;
Month end support Hardware, internet and associated infrastructure.

As with many other investment factors when implementing ERP, the investment associated with server, back-up, internet and associated infrastructure will vary depending on your choice of on premise vs cloud.

Even if you choose a cloud based ERP solution you will need to check what’s included. Also check if your current Internet speeds and plan will be suitable for a cloud deployment.

Internal staff investment – When implementing an ERP solution there will be time required from internal team members.

Think of the time required from your internal team members for:

User acceptance testing;
Preparation of data from legacy solutions;
Attending user training;
Attending project meetings;

Helping with the scope of works and functional requirements.

DID YOU KNOW? For every day that your ERP implementation partner invests in your implementation you should expect to invest at least the same amount of internal time.

As an example of this, during the implementation of a mid range ERP solution the vendor might quote 40 days of implementation time spread over a period (elapsed time) of 4 months. You should be looking to allocate at least 40 days of internal staff time to the ERP implementation.

When you think about it, 40 days spread over 4 months and shared amongst multiple team members (40 day across the team – definitely not 40 days per team member) is not a massive investment.

Now that you have calculated the full required investment associated with you ERP solution let’s focus on the return side of the ERP equation.

Is the ERP solution worth the investment? Calculating the Return

We would argue the following are key factors of the ERP Return on Investment:

Improved customer service;
Improved cash flow;
Staff retention;
Better, faster decision making.

So, how do we evaluate the tangible benefits of an ERP system?

Staff costs – if you are able to re-purpose people’s time away from mundane tasks and towards more meaningful contribution then there is definitely a saving to be allocated to the ERP project.

Let’s consider an example – if statements were previously sent out manually (5 hour job twice a month) and through the implementation of an ERP solution this process is now automated (15 minute job) then this process has been re-purposed. The person originally responsible for sending statements can now focus on more meaningful tasks – chasing debtors etc.

Debtors – on the subject of debtors – a good ERP solution should give you the ability to expedite cash collection through more timely and meaningful information about debtors. Think about debtor call lists, automatic follow ups and notes. Take the value of your debtors book, work out the likely debtors days outstanding before and after implementation of your new ERP solution. Every day that money is collected ahead of schedule saves you money.

Quote to cash – on a similar topic to the debtors book raised above – will your new ERP solution help you expedite the quote to cash journey? The quicker you can get quotes to customers, deliver goods and get your invoices paid the more cash you will have in the bank for your next investment.

Cash flow – the above two topics, when correctly implemented will free up cash flow.

Financing costs – with a positive impact on cash flow an ROI can be measured based on the reduction in financing costs.

Customer satisfaction – can be measured through Net Promoter Score and other associated means.

Staff retention – going home early is the phrase that is often used. Implement a good ERP solution and you can “go home early”. There is no doubt that a well implemented ERP solution can help with staff morale and retention by helping team members get their jobs done quicker – allowing the team to focus on more meaningful, strategic jobs. We have seen examples of team members that used to spend 2-3 days a month manually preparing reposts for board meetings. After the implementation of an ERP solution these reporting times have been reduced to less that one hour per month. What’s more is that reporting accuracy improved.

Other benefits include;

Better, faster decision making;
Growth without the growing pains;
Growing without the associated people cost;
Customer goodwill;
Inventory holding.

Conclusion

Evaluating the ERP Return on Investment is a fundamental step to undertake before proceeding to rollout.

Over the last 12 years we have assisted many businesses in assessing their current environment and selecting the right ERP solution to ensure positive ROI.

How would you calculate the ROI of your ERP system?

Leave a comment below to let us know they key aspects that will contribute to your Return On Investment Evaluation.