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?
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.
In talking with growing businesses, we're finding a common issue of data reentry. If your employees enter and re-enter sales information in multiple software programs, it can slow the sales process and allows for data entry errors. But how can you streamline the work flow management?
Answer:
Procedures within the sales process may be fragmented in various ways, for example:
- Sales inquiries are received by e-mail, telephone and fax
- Inquiries are maintained on a spreadsheet
- Price quotes are calculated on another spreadsheet
- Follow-ups are maintained on yet another spreadsheet
Most accounting software can maintain and integrate several procedures within a single program. The software applications can generate lead follow-up letters, check inventory levels and automatically reorder, forecast potential product demand and allow customers to enter orders through your Web site.
Streamline your software system. Your business will save money, and your sales force will become more productive.
Find the right small business Enterprise Resource Planning ERP software system and accounting software for your business. Download the Software Selection Guide.
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.
Many people use the accounting software in QuickBooks and forget the rest. For the most part, clients know how to use accounts receivable and accounts payable. What is often forgotten or misused in QuickBooks? That would be estimates, sales orders, sales reports and items (products and services you sell).
People misunderstand the importance of using estimates (bids, grants, proposals or quotes) for follow up and profit margin tracking. Sales people or customer service could be entering those estimates directly into QuickBooks. Worried about your employees messing up your software? Security controls can be established so that they can't go anywhere else in the software. Do you know what your profit margin is per job or are you simply making journal entries and "approximating" the profit margins? What was the estimated versus actual revenue and costs? Can you set up your company's selling workflow in the software? You should be able to.
Whether you sell products or services it is vital to set up items in QuickBooks. Why? The more detail you use for item lists the better your reports. Questions can be answered like ... Which item is my best source of income? Which items are my best sellers? Product costs and labor costs should all be set up and tracked in QuickBooks. Pricing? Set up your price levels and use those to your advantage to help control sales profit margins.
The Sales Order tool is excellent for managing partial shipments and sales order fulfillment for inventoried products and their interface to purchase orders, pick lists, and packing slips in QuickBooks.
A full or mini ERP implementation should take full advantage of the financial and business software your company purchased.
For the above metioned QuickBooks functions, it makes a difference which QuickBooks package you have ...
Is QuickBooks right for your company? Compare it to other leading software systems: Download the Software Selection Guide