Companies need accurate, consistent, real-time data to give them the advantage necessary to beat the competition, and ensure they grow and develop. A key component in achieving this central source of dependable, actionable data is an ERP system. But how should you evaluate an ERP system and why should you buy one?
Reasons to Buy an ERP System
- Cross-company functionality
An ERP system runs and touches many company processes and functions. It’s not just a solution for the finance and accounting function; it does so much more than that. It has a shared database, which can be drawn on by sales, HR, marketing, warehousing and distribution. If your accounting system and warehouse stock aren’t connected, your processes could be misaligned or inefficient.
- Centralised data
Having just one once source of accurate data makes it easy for companies to make decisions – and make them faster. This isn’t so easy for companies that rely on spreadsheet accounting, or which can’t access up-to-date figures. Companies that want to maximise opportunities, sales and profit will want to ensure they have the best information to act upon. And that’s especially the case right now, when many industries are being impacted by the lockdown, with sales in decline or competitive pressures from trying to serve a smaller pool of prospective customers.
An ERP automates many processes, meaning there is much less manual effort required. This frees up staff time and gives employees ready access to the data that can help them to quickly respond to customer queries. This makes staff far more productive.
- Cost saving
Saving time leads to cost savings. Plus, when you have a single system running your business, you are able to eliminate the extra costs incurred from other technology vendors – for licences, maintenance, upgrades and so on. Additionally, if you have an ERP that is cloud-based – like NetSuite – then you will remove most of the costs associated with infrastructure, plus the costs of maintaining IT equipment internally.
- Increased revenue opportunities
Investing in an ERP system can bring in more revenue in several ways. Firstly, having accurate stock information can ensure that customer demand is consistently met, which in turn promotes customer satisfaction and increases loyalty and retention. Additionally, an ERP system will identify which products are your most profitable and can improve cash flow and demand forecasting.
- Improved business efficiency
Your business will be more effective with an ERP thanks to how it promotes cross-functional collaboration, automates and improves processes and brings real-time business intelligence across the organisation. This all promotes better decision-making – both at the strategic and tactical levels. There’s no longer the need to pool data across the organisation, or to build new spreadsheet scenarios every time a new strategy or tactic is up for consideration. Companies can quickly decide about which products to sell, in which markets and at what pricing.
How to Evaluate an ERP System
An investment in a new system can only come after a prudent evaluation process. This may include building a use-case scenario, examination of expected ROI and, almost invariably, a fair degree of internal checking and validation.
Most ERP systems offer functionality for accounting and finance, planning, purchasing, supply chain management, CRM, production control, ordering and fulfilment. Others may include ecommerce, professional services capabilities, marketing and HR management. Analytics and business intelligence capability varies – with some systems offering customisable dashboards and comprehensive reporting functionality.
With so many features and differing strengths and weaknesses, it can be a complex process to define which system might be right for your business. Here’s some considerations that will help you through the process.
- Establish the project framework
The first stage necessitates deciding who should be involved and what your desired goals and time frames will be. Setting the specific project goals is also vital in ultimately ensuring a successful implementation.
- Scope out your requirements
Decide which functionality you want to incorporate in your new system. This can start at a high level and drill down as you go. Some companies will put together a request for information (RFI), which can be submitted to software suppliers so they can determine which solution best meets your needs.
- Evaluate potential suppliers
Beyond the software, it’s important to evaluate suppliers too. You will want to consider costs for implementation and customisation, as well as how well suppliers can service other needs, such as technical support and training. It’s also important to check references, testimonials and case studies to ensure the suitability of a supplier.
This stage will take all the information you receive from potential suppliers and evaluate it against your requirements. You will want to consider: project implementation times; how closely a solution can be customised to your needs; how well a supplier understands your industry or if it has experience of working with companies similar to you; who will manage the project from your side and the supplier side and how they will work together as a team; how easy the software is to use and what training will be required; how your data will be migrated from your old systems to your new one; how flexible the platform is; what updates and maintenance will be required and how easy that is to undertake; and finally what the costs will be for implementation, annual licences or subscriptions, training and maintenance.
- Build the business case
Alongside the previous consideration, it’s important that you analyse how a new system will benefit your company. You can undertake cost-benefit analyses and ROI projections to help you build a business case. You want to be sure that there is a positive outcome when you weight the value that a new system will deliver for your company against the costs and risks of implementing one. The business case for an ERP can be evaluated examining how well the problems you have can be addressed by a new system – and how quickly. It might be that you will immediately see a return due to having a faster month-end close, for example. But other benefits might only be seen in the longer term – such as productivity improvements that can’t be fully realised until everyone using the system is trained.
An ERP system is a vital component for business success, providing the best possible basis for making business-critical decisions and moving quickly to take advantage of beneficial market situations.