The cost of an ERP system software depends on many factors -- size of the company, number of ERP users, functionalities introduced to the work flow software, number of software modules implemented, condition of existing IT hardware and the ability level of the company's team. Costs can range from $25,000 to millions.
About 45% of buyers experience unexpected costs that had not been initially taken into account -- Why?
Critical Implementation Meeting: The company's team should meet with the vendor's Project Manager and know from the beginning who's assigned to what tasks for the company and for the vendor; critical timelines to be met and consequences of not meeting those timelines; parallel date; test date; and go live date. When a company does not meet those timelines it equates
to the allocation of additional internal resources (costs); lost time using the new ERP packages (ROI); and most importantly, a decrease in the momentum of implementing the new ERP software system.
Training Costs: Be sure to allow for sufficient training for your team. Ineffective training relates to lost functionality of the software and a poor work flow. Companies do not realize that with poor training they lose -- software is used incorrectly resulting in poor data. I see this often with ERP implementation in QuickBooks Premiere and Enterprise (mini ERP systems) users who state that they know the software but then never knew about Estimates, Sales Orders, Inventory classifications, Assemblies, On Line Banking, etc. What a waste of your software package!
Data Conversion: STOP! This is the biggest cost of any system. Do you really need it? Store the data in a place where people can refer back to it if they need it. Export the most often used data to some Excel spreadsheets and refer to it when you need to.
Integration Costs: How critical is it to "interface" with another system, application or function? And what is the definition of that "interface"? How will the data reach your accounting software, sync with the CRM system database, update the inventory and product information, or is it a simple journal entry in the General Ledger and it's really not interfacing all of the data?
IT Infrastructure Costs: Know the specs for your software, the capabilities your internal hardware, the cost to maintain the system internally and be aware of the fantastic outsourcing opportunities to have everything managed off site. Do the ROI and see for yourself.
Customization: Determine that there's a valid ROI before signing off on a customization. In addition, be sure to have a scope of work and hours allocated to the customization before agreeing to it.
KISS: Remember, keep it simple enough so that several people can learn the system. What if your key expert leaves? Don't make it too complicated.
Licensing: Buyer Beware!! There can be many license fees involved besides those of the ERP System Software -- SQL, Crystal Reports, Access, Third Party modules, etc. Get all of the details up front. The type of licensing -- packaged, concurrent, module-bases, site or location and subscription.
ROI (Return on Investment): What helps to define this?
- Inventory solution that reduces inventory levels.
- Inventory management and accuracy.
- Ship more orders and on time.
- Shrink the aging report for accounts receivable.
- Accurate data for margins, revenue, forecasts and budget.
That was our last blog on this ERP Systems series. We hope you enjoyed it and we would love your feedback!
Don't fall into the pit of making your ERP system software too complicated. Then you'll have to hire a team to use it effectively.
An ERP system software is primarily an integrated suite of modules and features that can encompass financial, production, services, human resources, payroll, time entry and CRM (customer relationship management). The software is dependent upon how your company work flow operates, how you would like to set it up and how it can be incorporated efficiently and effectively into the company's environment.
The modules your company purchases is dependent upon what is most important to the company's processes (this goes back to the beginning of our ERP blog series). 
Again, one word of advise as you continue the ERP research buying process ... Keep It Simple Stupid... the old KISS method still applies here. An ERP system too complicated can make your team's life miserable. Then what happens? Your team only uses 35% of the ERP system software you have, which is the national average.
Typically companies are examining a combination of financial management, manufacturing, project management, supply chain management, product life cycle, supplier relationship or customer relationship management (CRM) software ERP modules. Know what your team desires and understand the resources needed from the company (not just the vendor) in undertaking an implementation of any piece of the modular ERP software. There's a commitment required from the company and the vendor and the agreed upon combination equals success.
Industry Specific ERP software can be necessary. I spoke with a CFO from a large asphalt company the other day. They have two types of software they use -- bidding and order/job implementation. Due to the critical element of what can be missed in a bid for a highway or a bridge, there was an ROI (return on investment) for the bidding software they implemented and used habitually. On the other hand, if some customization is necessary, most softwares can handle that but beware that you own the code and that it is in a programmed language that can be integrated to other applications or services.
Next week .... cost!
Which ERP System is right for your business?
Sorry for the delay in continuing our ERP system software blog series. We've had many inquiries. Let's continue to the buyer stage and try to define "what type of buyer are you".
For ERP systems the buyer types have been defined on the basis of the following: scale and complexity of business; modularity; and industry verticals. What does all of that mean?
Scales and Complexity of Business:
Elementary buyers are looking for simple ERP systems to meet their uncomplicated requirements. Usually the company is a growing mid-sized business and most requirements can be met with an out-of-the box ERP system that has minimal customizations. There may be some basic integration requirements and the business has limited IT support.
Enterprise buyers are focused on business complexity, integration, scalability and globalization. These buyers tend to be mid-size to large enterprises with highly complex business processes. A high level of customization may be required for their niche requirements. Sometimes an in-house IT expert is required.
Modularity:
Suite buyers look for a complete ERP suite having all modules -- financial, production/business, and CRM (customer relationship management) to execute business processes across all departments. This type of buyer realizes the long-term strategic investment for the company.
Module buyers usually seek two or more ERP modules that can automate business processes for two or more departments but not the entire organization. This type of buyer is more price sensitive and is looking for short-term productivity gains. There may be significant integration with systems in other departments.
Industry Verticals:
Sector-specific buyers have industry-specific and specialized needs that cannot be met by generic solutions. The company may be governed by stringent regulations or compliance.
What type of buyer are you?
Next week -- ERP System Modules and Features
What ERP System is the right fit for your company?
As promised, we are continuing our series for ERP Systems. This is our second install of the ERP blog with more to come regarding purchasing, implementation and unexpected costs, open source, industry specific and ERP buyer survey comments.
10 Steps to Buying an ERP System Software
Enterprise resource planning software is an integrated information management system involving financial and business software for all industry segments.
1) Do we need an ERP System? Assess your existing business processes from ALL departments to identify whether there is a need for an ERP system software. Implementing an ERP system is a long-term strategic decision for the company and it alters the work flow of your company.
2) What are the goals and objectives for the selection? After you meet with all company department managers, you'll be surprised to find that not everyone has the same requirements for ERP system software but they will have some very specific "must haves". Know what those are! Realize that there is not an ERP software package that can meet ALL the business requirements of a company or industry segment. I had a client that approached me at the Rockford Chamber's Manufacturing Expo and he stated, "I haven't found a software that can do all of what I want it do." That's right, there's not a "magical" software out there. Sometimes the solution is to fix some internal work flow issues.
3) Form an evaluation process. Either have a company committee research what is out there that meets your requirements or hire a consulting firm to do it. Usually, it's a combination of both - functional experts from different company departments and an outside consultant.
4) Define product requirements. Don't make it too difficult. Define the simple first. Is user friendly the most important? What is the skill level of your team using the software? Is inventory your biggest headache? You can purchase the best industry specific software in the world, but if it's too difficult to use, to set up and to manage then the ROI (return on investment) is not there.
5) Develop a pre-evaluation selection criteria. Select the top 3 ERP packages for final selection that meets the critical business needs, matches the skill level of the users and implements the business model work flow for the company.
6) Check out your peers and competition. What are some of the financial and business software packages they are using? What do they like? What do they dislike?
7) Final 3 extensive research. Schedule the real time software demos (NOT a power point) for the final 3 ERP system packages. Be prepared ahead of time with the specific functions and reports that you would like to see.
8) Know the history. How long has this ERP system software been around? How many times has the company been purchased? How much "red tape" do you have to go through to get the answers for fixes to software development problems that may occur after an upgrade? What language is this ERP system written in - how many platforms?
9) Flexibility. How easy is it to interface with third party softwares? Do you own the Source Code after you pay for a customization? Will the customization perform easily after an upgrade?
10) Vendors. Pick a vendor who can work successfully with your company's team. You have to be confident that they can carry through the implementation. Each company has its' own culture and not everyone can successfully work with that culture. Finding the right relationship and commitment is key in a vendor relationship. How long has the vendor been around? Check out their references.
Next week we will slide into third base with our ERP System Modules and Features.
For the small to medium size business, financial/production software, or ERP systems should not be made difficult. Some ERP systems (Enterprise Resource Planning) create complexity and duplication of effort. Really, it should not be that difficult. Who said an ERP system had to be complicated? People seem to think that an ERP system is unaffordable and hard to set up and implement. This shouldn't be the case.
Eight Warning Signs
- You can't get your data out. You know it's in there but you have to pay some programmer to build you a report to receive the data in some type of format that you can actually use.
- Upgrades are costly, time consuming and disruptive. If you haven't applied your software upgrade because you are afraid it will wipe out all of the customizations you paid for, then you are missing out on functionality and technology improvements that could help your business run more efficiently.
- Disaster recovery plan involves tape back ups. Back ups should be easy, not a headache and worrisome. Yet, we always hear the stories about how the back up never took place, we couldn't restore our data from the previous back up, and now we have lost over a weeks worth of data transactions. Ouch! With virtualization, there's no need for tape back ups any longer.
- Hardware costs increase every year. Can you say SaaS, Cloud, Virtualization ....
- High renewal fees. What's the ROI (return on investment)? Has it been worth it in the past? How can we lower these? Do we need that many users or applications?
- Can't access data easily when traveling. The system is too clunky or too costly to access remotely.
- Vendors or Customers cannot interact with the system. The is very important to grow your business and become more efficient.
- Costly training for new employees. Is the ERP system difficult to learn? It shouldn't be.
DataCraft implements user friendly ERP systems software. Give us a call. We can help.
P.S. Stay tune for three other blog series regarding ERP systems.
What ERP System is right for your business?
A study conducted in 2007 showed that nearly 25% of business owners have been victim to fraud.
Unfortunately, just about every company is susceptible to some sort of fraud. There are different forms of fraud ranging from check fraud to embellishing expense accounts, and third party kickbacks. The tactics differ, but the results are always the same, loss of valuable company time and resources.
But that doesn't mean that they have to fall victim to it. Developers for ERP system software and accounting software systems like QuickBooks Enterprise are making it easier for businesses to detect fraud.
Don't fall victim to fraud, learn how to protect your company. Download the white paper "Protect Your Business from Fraud" for simple steps in how to secure your company's financial information.
If you've ever wondered how to improve the performance of your accounting software to make it a little faster, a little more efficient, and a little more functional, there are four areas you should consider looking into.
Integrate modules
If your accounting modules are not "communicating", you may be missing out on some built-in efficiencies. For example, by integrating your accounts receivable and accounts payable modules with your bank reconciliation module, you will be able to quickly reconcile your bank statements each month.
Install or activate Crystal Reports
Crystal Reports is a report writer that comes bundled with many accounting packages. This powerful tool can help you write specialized reports using information from a variety of sources.
Customize data-entry screens
Many accounting packages allow data-entry screens to be customized for specific users. This type of tailoring can allow employees to enter data with minimal keystrokes or mouse clicks.
Run file maintenance periodically
File maintenance may be named differently in your accounting software. Other terminology may include "rebuild", "compact and repair", "re-index", or "synchronize". Whatever term your accounting software uses, the process of reorganizing your data files will increase the speed with which you are able to access them.
Are you getting the most out of your software workflow? Schedule a Business Clarity Session
We've all been hit really hard by this winter weather, so what better way to relax than with a good book? We decided to take a break from our usual accounting basics and ERP software talk to compile a book list for you. Check out some of our favorites that made it to our 2010 Winter list
Make Today Count - John C. Maxwell (Center Street) This is the second time Maxwell has made it onto our reading list. (Check out the other time here). Maxwell's book discusses the importance of making the right decision in twelve critical areas of your life, or what he refers to as the "Daily Dozen." Maxwell suggests the path to being successful starts small with making the right choices on a daily basis.
The Narrative of the Life of Frederick Douglass -Frederick Douglass(Fall River Press) Considered a milestone in American history, The Narrative of the Life of Frederick Douglas chronicles the life of the famous abolitionist. Originally published only seven years after his escape from slavery, it became an instant success.
Common Sense -Thomas Paine (Penguin Classics) This is the pamphlet that started it all. First published in 1776, Common Sense challenged the authority of the British government and the royal monarchy. What made his writing so popular? He didn't try to wow the masses with philosophy, instead he wrote for his audience, not above them, impassioning them to want to make a change. It's still as inspiring today as it was nearly 250 years ago.
Embrace the Struggle- Zig Ziglar and Julie Ziglar Norman (Howard Books) Written after a traumatic fall that lead to a head injury Embrace the Struggle discusses the importance of optimism to get us through the hard times we all eventually face. Through his own stories and the stories of friends, Ziglar highlights "living life on life's terms."
Exploiting Chaos: 150 Ways to Spark Innovation During Times of Change- Jeremy Gutsche (Gotham Books) Hailed by many as one the best business books of 2009, Exploit Chaos takes readers on a visual journey to help ignite ideas for a successful business. Gutsche's writing style and graphics fit in perfectly with today's busy reader. Looking for inspiration to put these challenging times to good use? Check out this book.
The Findability Formula: The Easy, Non-Technical Approach to Serach Engine Marketing- Heather Lutze (John Wiley & Sons) Ever wonder how customers are thinking when they search for a product or service? Lutze's book helps marketers at all levels of experience re-energize their website to make them more profitable. Her step-by-step guide to Pay-Per-Click campaigns helps to make your company visible throughout the customers' buying cycle.
What does scalability in terms of accounting software mean?
No, we are not referring to a) mountains or b) a career track. In the accounting technology world, "scalability" refers to how much or in what ways a particular accounting software package can be expanded. Usually, the term means a product's ability to grow without causing undue disruption of the processes associated with its use. "Scaling up" refers to expanding the size of the system, the number of users who can access the system, or the amount of information the system can handle. "Scaling out", on the other hand, means to increase the number or types of functions the system will process.
Let us give you some examples.
Scaling Up
Consider a person who has decided to start a pack and send company. When the business first opens, sales, accounts receivable, checkbook reconciliation, and accounts payable can be handled with a simple accounting package on a single computer. Only the owner of the business probably accesses the accounting system. As the business grows, additional computers are added and networked so employees, in addition to the owner, can work in the accounting system. Accounting packages with the ability to "scale up" are important for businesses that plan to add users to the company's current accounting functions.
Scaling Out
As our pack and send business grows, our business owner has hired several employees and needs to process payroll on the accounting system. Also, recognizing an opportunity in the marketplace, the business expands to include production of a special packaging material. Now the accounting system needs to be able to "scale out" and increase the functions it can perform. In this case, payroll, inventory management, and job costing modules could be helpful.
Small, privately owned companies have long been the basis for business growth in the U.S. The Small Business Administration estimates that companies with fewer than 100 employees drive 80% of the U.S. economy. DataCraft, Inc. applauds your efforts.
Find the right small business Enterprise Resource Planning ERP software system and accounting software for your business. Download the Software Selection Guide.
Don't be confused when you hear QuickBooks and ERP system in the same sentence. QuickBooks Enterprise is not to be confused with QuickBooks Pro and Premier.
The QuickBooks Enterprise Solution has been an affordable solution for our customers this year. It really is a mini ERP system that supports financial, manufacturing, supply chain, professional services, inventory, funding, time entry, and many other work flow processes. It has been a great economical solution for our customers' pocket books. The renewal fees are low and the software is affordable. QBES Brochure_10.pdf
(You recall that last week we referred to the definition of an ERP solution. )
The Intuit Solution Provider Program has enabled DataCraft to help grow local small and mid-market businesses through the sale, implementation and service of Intuit solutions in the manufacturing, distribution, professional services and not-for-profit industry segments. The implementations helped the owners of company's examine their accounting services, business work flow for the software and payroll service outsourcing.
The mistake that is made with QuickBooks Enterprise (QBES) is that companies hire an individual/company that is capable of installing the software but does not have QBES application set up and implementation knowledge; or the company/individual are accountants who may have some knowledge of set up but are lacking in the experience to fully understand the work flow of the software. Be careful!
Since 2008, DataCraft Inc. has been an Intuit®Solution Provider serving the Northern Illinois and Southern Wisconsin area. Intuit Inc., the publisher of QuickBooks®, is the leading provider of business and financial management solutions for small and mid-sized businesses, consumers and accounting professionals.
Next week .... what is overlooked in most QuickBook Enterprise implementations?
Find the right small business Enterprise Resource Planning ERP software system and accounting software for your business. Download the Software Selection Guide.