Chapter 5 – How to Select ERP Without Losing Your Mind (or your job)
Accounting Centric vs. ERP Systems
Will a 3rd party module bolt-on to your current Accounting software be enough or is it time to take the plunge to an Enterprise (ERP) solution? Will your Accounting firm have the expertise you need, or would it be better to invest in an ERP Industry Specialist? What are the differences and what is best for your Firm? Let’s discuss the options…
Accounting Centric vs. ERP Systems
(Enterprise Software vs. 3rd Party Bolt-Ons)
What is the difference between Accounting Software and ERP Systems?
Accounting centric systems are just that, accounting systems. Commonly they will include standard features such as AR, AP, GL, Financial Statements, Cash Book/Bank reconciliation, Cash Flow analysis and Asset Depreciation modules.
Accounting centric systems are usually marketed through Accounting firms, that are looking to extend their business, or are in partnership with a VAR relationship.
Whereas ERP systems commonly feature what the accounting systems include, plus functionality for all areas across the Enterprise (Operations, Customer Service, Quality, Manufacturing, Traceability/Regulated requirements, etc.).
As ERP systems require more specialized staff to support and implement, commonly ERP systems are marketed by dedicated, and exclusive resellers or even direct from the software developer themselves.
“All your customers care about is how good is your product, how much it will cost them and how fast can they get it.”
Do the Accounting Centric Systems also offer ERP Add-on Modules?
Yes they do. As the Accounting Centric customers grow, their systems need to grow as well. To maintain their customer base, many Accounting systems developed “add-on” modules or interfaces to existing “point solutions” to extend their software features and life with their customers. Commonly these “add-ons”, which were internally developed or 3rd party, are not nearly as robust as their core accounting features. Guess where the accounting centric vendor’s core competency is?
When reviewing these add-ons, obviously you need to confirm if the functionality meets your needs. But there are other concerns to consider. Does the software vendor have experience with those specific add-ons or even with your unique business needs? Will you be dealing with multiple training/support organizations? Does the add-on have a similar look and feel as the core accounting system, or will you be learning two separate systems? Will there be any finger pointing between the two systems when problems arise?
Usually within a company, Finance is a supporting function to the value chain (as is HR, Purchasing, etc.). Whereas making parts adds to your bottom line.
Your customers could care less about how you crunch your numbers. What they care about is how good your product is, how much it will cost them and how fast can they get it.
“Some indicators that it maybe time for ERP:
Users complain about system performance
More in-house databases and Excel spread sheets are being used to compensate
Better control of operations is apparent
Inventories are getting too high
Competitors appear to have an advantage regarding service provided and value
Shop Floor control data is lacking
Purchasing costs are too high
Customer service complaints
Data access is just not sufficient
Current IT supplier doesn’t understand your business
Are you more or less efficient since going live?
If you could do it again with what you know now, would you make the same decision?”
The Advantages of the Accounting System Strategy
Commonly provided by your CPA firm or a VAR. Your CPA firm works with your company in other aspects and already has a relationship with your group which can be very comforting.
3rd party modules have been built for almost every industry target, so they probably have a solution that will appear to fit.
If a good accounting system is your priority, your CPA’s already know your requirements.
A collection of 3rd party modules can be a “best of breed” with ready built interfaces.
Once it becomes obvious that additional system needs are required, it is financially logical to review the add-on modules first. You will notdisrupt your financial staff by forcing a new system on them, the add-on modules will be comparably inexpensive and easy to implement.
But remember that it is easier to implement the new processes and procedures an ERP system will demand when your firm is still in its infancy and can adjust easily.
If the information required to run your business efficiently is not available to your staff, the concern of short term costs and disruption may be holding your company back.
Common Disadvantages of Enterprise Systems
You have to buy the “whole system” which means paying for functionality you might not implement today.
Regardless of how complete the Enterprise system is it may be lacking in functionality that is critical to your firm. You can always interface to a 3rd party application for this purpose, but the interface problems described above would be the same.
ERP Systems Can Be Expensive
ERP systems do appear expensive, especially the initial costs. But if you take into consideration how much you have spent over the years with “band-aid” add-on solutions and the islands of information you have evolved into that may require more labor to maintain than a fully integrated system realizing what you have doesn’t provide the information you need.
With improved inventory control, costing, and quality, the cost of ERP might be justified. Besides, an ERP system could be necessary to maintain your current business health.
Some Benefits for Enterprise Systems
One Software developer. The User Interface is similar throughout the system for an easier learning curve and far less confusion.
One support, training and implementation team, no finger pointing.
Expertise In Your Industry
The ERP system should be the only system you need for the next 10 years. You shouldn’t have to go through another implementation for a long time.
- Single data entry updates data throughout the ERP.
- ERP systems are commonly more stable to run and less down time.
- New upgrades take into consideration the entire system, not just pieces.
- Will likely increase the value of your company.
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Andy provides common sense advice on how to uncover the truth about ERP’s so you can make your own informed decision.
Here’s what Andy’s audience and clients are saying about him…
“Thanks for your hard work on that presentation. I liked your low pressure approach and your affectionate cynism for the ERP industry. Very enlightening and fun. I particularly liked how you did not attempt to sell anything.”
“Andy has an uncanny ability to provide a simplified story line to what is often a highly complex topic. If you believe ERP to be the life-support system of any manufacturing environment, then you’ll need to consider Andy as the ‘oxygen’ behind that system”
“Congratulations on the well-delivered presentation. Usually, I attend these to roll my eyes at the triviality of the ideas discussed. In your case, the presentation actually covered all the key points anyone needs to remember about the ERP selection process. It should be of much value to all attended, as it was to me.”
“Thanks for the informative presentation on ERP evaluation. Your comments about focusing all facets of evaluation on a company’s idiosyncratic and non-negotiable requirements were spot-on! This is the key take-away for prospective ERP buyers. You did a nice job. Thanks, Andy”