ERP Financial Solution Choices
There are many ERP/financial solution choices and many differences among those choices. Large fortune 1000 companies hire consulting firms and can spend a year and commonly over $500,000 in order to help them make a decision. Small and middle market companies do not have that luxury. For the reader of our content we are focusing on those coming from accounting software like Quickbooks or other inexpensive or legacy software products. These software products are inexpensive to buy, easy to implement, and simple to maintain. They are great for a new business that just needs a simple general ledger with A/P and A/R functionality. Much of the business can be supported initially using Excel, Sharepoint, and email.
The problems start as the business becomes successful and starts to grow. More products are added with complex transactions and financial activity needing to be recorded. New personnel are hired as you move from the owner/founder managing the books to a bookkeeper to a controller and eventually a CFO. Throughout the process shadow systems, external operational and reporting tools are created and multiply. These manual systems are cheap to start and meet the needs and budget of the business. The negative is they are generally not accurate, not controlled, and only known by one or two key employees. If the key users leave it is costly, if possible, to pick up the work and go forward. This can be a calculated and appropriate risk in the beginning but as the business matures and new stakeholders are added the risk of failure becomes unsuitable.
So, what is next? The next step in the maturity of a company is to implement an enterprise financial management solution, or otherwise known as an ERP (Enterprise Resource Planning). The benefits to an ERP include the single source of data capture or integration from source systems for the necessary financial transactions enabling operational reporting and financial decision support. The right solution can be extended and integrated to/from further supporting your company’s specific data and process requirements. For example, a software company may capture users and revenue from an in-house developed product. That information can be interfaced to the new ERP for financial reporting. As the company grows and adds new products and services they can all be interfaced to the one ERP for enterprise reporting of financial statement creation. Your ERP is your single point of truth for financial reporting.
How do you make the right choice?
How can you make the right choice? How do you know what product will fit your needs? How can you prove to the company’s owner, board, and investors that you are making a sound investment with the best interest of the company?
You can hire a consulting company that specializes in ERP software selection projects. This will cost around $15,000 to $30,000 depending on the complexity of your business. The value is having someone that knows the many ERP products, has contacts at the software providers, and know implementation partners that may be a good fit. When you contract a consulting firm they are focused and their time is allocated to making the selection effort a full and complete project. This is one of the keys to your success. It takes time to complete the diligence needed to document requirements, identify vendors, complete demonstrations, evaluate the fit, and determine what to select.
You can go it alone! ERP software selection is one of the services that several of us at Roghnu used to perform. While we do not offer Software Selection as a consulting service because we are no longer independent we do provide the process and general tools to help you perform the process internally. Much of the information we provide will help you follow a defined process specific to your ERP selection. If you have the time and resources you can perform an appropriate evaluation and make the right decision for your company.
The wisdom of the finance crowd
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