The enterprise resource planning (ERP) market is expected to exceed $4.95 billion by 2025, and Gartner reports 85% of finance teams are undergoing or planning a financial transformation. Without the assistance of ERP software, a successful financial transformation would be nearly impossible; however, deciding which system to invest in is easier said than done. Choosing the right ERP to fit your business requirements and provide you with all the features necessary for your industry is essential.
Establish your ERP requirements checklist
A quick Google reveals several ERP checklists and templates that are not tailored enough to be useful. If you want a list of every feature an ERP could possibly have, these have a place. However, it’s better to start with the unique demands specific to your company than become overwhelmed by exhaustive lists of expensive features you may never need. Creating a custom checklist of your specific needs will ensure that you don’t waste money on flashy features with little to do with your company’s goals. The following will walk you through creating your ERP requirements checklist, the first critical step in your financial transformation.
Survey your team to create a list of requirements
The people most familiar with the reasons why you need a financial transformation will be those who work with your current system every day—your team. Their insights are invaluable as they’ve first-hand knowledge of the features you will need as your company scales. Together, brainstorm a list of requirements and then revisit the list to prioritize the features as “must-haves,” “good to haves,” and “nice to haves.” Your final list will prevent you from succumbing to decision paralysis by keeping your team’s goals front and center.
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Consider company reputation and integration
Once you’ve decided what you’re looking for, create a shortlist of ERPs that fit your requirements. There may be more than you expect, so it will be critical to further categorize each of these ERPs. To narrow down your options, it’s best to consider each company’s reputation and each system’s integration capabilities. Partnering with a company that lacks a clear implementation plan and support team could ruin your transformation. The most advanced ERP software available will be utterly useless if it is not properly integrated. It’s also important to check if the system will work for your industry—a healthcare provider will not get much utility out of an ERP designed explicitly for retail supply chain management.
Set a realistic budget covering total cost of ownership and ROI
Determining how much money is realistically available for an ERP system is crucial. In 2021, a report that analyzed 1,338 ERP projects found that the average budget per user for ERP software is $8,265. In addition to the upfront cost of the software, your budget should cover implementation, integration and onboarding. As you establish a budget, you may have to re-evaluate your requirements checklist to ensure that each item appropriately reflects the resources at your disposal.
Next, you need to calculate your return on investment (ROI), which will not be as straightforward. To get a clearer picture, it helps to examine the costs and benefits over time so you can accurately calculate the amount of money saved from improvements to the system. On average organizations can expect to recoup their investment within sixteen months and achieve 200%+ ROI.
While the average return for an ERP is $7.23 per dollar spent, some ERPs perform even better, like Microsoft Dynamics 365, which delivers $16.97 per dollar spent. With your new ERP taking care of time-intensive work, your staff will be free to provide valuable services that would have been impossible before. The time and money saved from process automation will have a measurable effect on ROI.
Get buy-in from upper management
Deciding on an ERP is a significant investment. Your new system will operate at the very heart of your business for at least a decade and will transform the role of your finance department. It’s mission-critical that upper management understands the full value of the project and the influence of business complexity on cost. Expecting to cut costs and improve service simultaneously or equating customer service with value delivered are hallmark mistakes of unsuccessful financial transformations. From the beginning, set realistic expectations with upper management and your team to ensure that your finance department transforms into a more valuable business partner.
Look for features to support your financial transformation
Although your ERP requirements checklist is the ultimate guide to your business needs, some features can transform almost every business. ERPs automate various processes to streamline your operations, which results in an offshoot of benefits like improved customer relations and reduced overhead. To get you started with brainstorming the features and functions that would help you reap the most benefits, we’ve compiled a few of our “must-haves.”
A readily accessible, centralized database that integrates data across departments and operational requirements is key to transforming the role of your finance department. Decentralized systems result in siloed data, which creates bottlenecks whenever finance needs to interface with other departments. A unified source of information can reduce the time it takes to complete tasks like accounts processing from weeks to minutes.
Read more: Managing centralized vs decentralized accounts payables
Slow and inconsistent payments restrict cash flow and inhibit long-term planning. By harnessing the power of AI, you can stay better informed with rolling forecasts based on customer payment histories and finance trends. Predictive analytics make it easier for financial managers to spot credit risks and appropriately allocate funds to streamline payment processing and collect revenue faster.
In a 2017 survey, 78% of respondents said decision making has become more data-driven over the past three years. ERPs allow you to access data in real-time. With the most up-to-date information available at any given moment, your team can optimize production planning and project management. The overall agility of your organization will also increase as it is easier to overcome market disruptions through quick pivots informed by real-time analytics. This feature is particularly handy for the manufacturing industry, as teams examine processes and coordinate projects by relaying product-related information at each stage of development across multiple locations.
This feature is critical if you work in a highly regulated industry, like healthcare or financial services, as it helps to keep your company remain compliant. Compliance standards are constantly being updated and can be tricky to manage through growth. Broadening the services you offer or expanding into new territories will introduce new regulations you must follow. Violating regulatory compliance can cost millions of dollars per year, so having a comprehensive compliance management system will help you mitigate the risk of fines and penalties.
As your company continues to grow, you will inevitably accumulate and handle more and more data; however, the risk of compromising that data will also increase if you’re transferring reports and sensitive information between multiple systems. The average cost of a data breach in 2021 was $4.24 million, and sticking with an analogue system doesn’t guarantee your data is safe, as Elkhart Emergency Physicians realized when they accidentally exposed 550,000 records because a third party didn’t shred the documents before disposing of them. It’s best to avoid data insecurity by investing in ERP software with a robust, scalable security system to reduce the risk of a security breach significantly.
Read more: Why security is key when it comes to your healthcare ERP
Supply chain management
Automated data entry, materials sourcing, and inventory of goods can significantly improve warehouse and inventory management. Using software will also allow you to create a trackable history to gain insights into the performance of different products and troubleshoot supply chain issues. Look for software that will go one step beyond and compare pricing from all available vendors to ensure that you’re always getting the best deal. Companies that handle complex supply chains daily, like those in the retail and distribution industries, should prioritize this feature as efficient management can result in greater customer satisfaction and retention.
Subscription billing management
Originally a staple of the SaaS community, there has been a surge in companies using recurring billing models across all industries. If your company offers or is thinking about providing subscription-based services or recurring payments, you must invest in an ERP with subscription billing management. Your system will need to handle deferred revenue, keep a thorough record of revenue recognition, and remain compliant with regulations like ASC 606.