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Is your business ready for ERP?

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At some point, a growing company will need to consider the transition from a
simple accounting package to a software system which reflects the growing
complexity of the organisation and which brings the ability to provide
improved oversight over a range of business processes and functions. This is
according to Kevin Clarke, country manager HansaWorld SA.

Probably the biggest immediate difference between an accounting package and
an ERP system is the cost. That in itself might serve as a major turnoff for
the growing business. After all, money is needed for working capital, to
ease cash flow and to acquire essentials such as plant and machinery,
premises and stock. And when you are looking at a R500 000 ask for a
software system for a ten or 15 users, that's a big ask. It is also far more
than what you're likely to pay for a bookkeeping program.
Cost will grab the business owner's attention, but savvy customers will
appreciate that you get what you pay for. If you buy an accounting system at
Makro, that is what you will get. The off the shelf accounting package
requires no services and no specialised skill to set up and little or no
maintenance; however, it remains very limited in what it can do for your
business. Don't expect that to take control of all your business needs.
But spending on ERP is an investment and here's why.
When you buy an ERP system, you're getting a lot more than just that
software; there are three components to the cost of ERP, being licensing,
maintenance and the need for professional services for implementation. Over
and above that, you are buying business processes which incorporate best
practices. That means essential functions benefit from proven efficiency.
Deploying ERP also provides an opportunity to examine your business and
enjoy exposure to the knowledge of the consultants who will work with your
company.
Most ERP software comes with predefined business processes or workflows.
These will facilitate common processes such as purchasing, sales, logistics
workflows and many more. Companies accustomed to using a standard accounting
package or spreadsheet are likely to bypass steps in a best-practice
workflow, perhaps out of convenience or even ignorance.
While that may be OK for a small company, as the business grows it should
incorporate the best practice approach since these additional steps exist
for very good reason. For example, control is probably the biggest challenge
as a business grows. In early days, the business owner is able to do
everything and manage everything; as the company expands, he must delegate
responsibility and rely on others. If the system is able to support and
automate some of that delegation through workflows, maintaining control is
far more likely.
The ERP consultant will compare what the business is presently doing and
what the software does for the same process. Most business owners appreciate
that the ERP system' way is right; there may be additional steps, but better
control results. Be that as it may, the likelihood of a level of
customisation remains; typically, with the implementations we have done, up
to 85% of the ERP processes are standard with a small element of
customisation the norm.
Companies which are losing control on accuracy should consider making the
move to ERP. If what keeps you awake at night are questions like what stock
is on hand and where, what the status of the debtors book is, whether or not
the General Ledger is up to date, chances are your business needs to make
the move from an accounting system to ERP.
While any system (that includes bookkeeping software) ends up in a General
Ledger (GL), the ERP solution does far more, adding operations on top of the
GL grouped by department. The system can handle multiple locations in real
time, providing visibility and management across branches, while personnel
can use various components of the same system from different locations at
the same time.
It is also far more detailed, with the bigger record structures; the
information which is captured and passed up and down the supply chain not
only supports better management but provides for more advanced
functionalities such as Business Intelligence and Customer Relationship
Management.
In terms of detailed business requirements, ERP also provides for
escalations, approvals and workflow management, while solutions can also
integrate with third party applications to meet unique or specialised
business requirements. As an information-driven solution, it also delivers
more insight through reports, exception notifications and insights into key
performance indicators. All this information supports effective decision
making and eases day-to-day management of the increasingly complex
organisation.
Remember, though, that ERP is an investment and not a short-term purchase.
As such, the decision is not one that should be taken up lightly.
Significantly, introducing a system for the first time can result in a good
deal of pain and even emotion. If the process is not done 'hands on', the
business might lose the investment. Implementations take not only money, but
also commitment and focus over a not-inconsiderable period of time.
It can't be denied that there is a bad rap with ERP, but this is not a
failure of the software or the concept. Rather, many failed projects come
down to a lack of change management and the possibility of unrealistic
expectations created in the sales process. The reality is that ERP is hard
work which takes an investment of time and money. It does not and will not
magically solve business problems or result in an instantly smooth-running
company.