CFO: What is ERP (Enterprise Resource Planning)?
No matter the CFO’s or the finance manager’s talent and dedication, technology dictates whether a company’s financial function is administrative whack-a-mole or a strategic driver that propels growth. Unless you are using an Enterprise Resource Planning system, or ERP, you are stuck in the cacophony of the penny arcade.
Let’s be honest and channel CNBC business guru Marcus Lemonis for a moment: “Business is about profit.” How a company manages its financial data operations and processes defines and drives its profitability, as well as its ability to grow and adapt.
CFO Magazine’s May 2015 “Metric of the Month” illustrates that businesses that suffer from inefficient finance software systems “are, sadly, still wasting hundreds of thousands or even millions of revenue dollars.” Much of those dollars go to paying accounting staff to manually collate and input financial data.
This costly gap arises from overlooking the fact that today’s role of the Chief Financial Officer and the financial manager must evolve into the technology sphere to secure the competitive edge. A recent study reported that only 27 percent of CFOs steer technology decisions. In other words, for the other 73 percent, someone else is dictating what financial technology is driving (or stalling) the company’s profit, growth, and adaptability.
If you are responsible for the financials of your company, you should change the dynamic and start by considering the following:
What is ERP?
ERP stands for Enterprise Resource Planning. It is a suite of business planning and financial accounting software that integrates your company’s core processes and produces detailed real-time reporting on: inventory, supply chain, customer experience and orders, vendors, scheduling operations, delivery, human resources, payroll … Anything that can be quantified in dollars and cents.
What do ERPs do better than QuickBooks?
It is all about delivering real-time customized financial accounting data accurately to your C-Suite and investors on demand. An ERP system allows businesses to transparently and seamlessly integrate the detailed complexities of a business in real time. ERP systems also facilitate multiple posting processes simultaneously, so if one user populates a field in one file or program, that data updates related processes, thus aligning separate yet related departmental operations. Because ERPs are flexible, they can change and evolve to scale with your business’ expansion requirements, without crashing the operating system.
What’s in it for me and my business?
It is all about value. A correctly configured and scaled ERP system will deliver ROI through time, which equals money. Instead of collecting, collating, and reconciling data manually, an ERP system consolidates accurate and up-to-date financial data to the CFO’s or financial manager’s specifications. This automated synthetization allows for tracking key performance indicators (KPIs), and the ability to discern with clarity underperformance and opportunities in a business’ core processes. Simplifying your financial operation process will free up the potential to analyze, innovate, and adapt.
What about actual dollars and cents?
An ERP system is not cheap, but neither are the costs in time and resources associated with forcing your legacy system to work for you or making up for where it falls short. Consider the resources you and your staff spend on designing an accurate work-around, duplicating data manually, or finding and then hacking a software add-on to operate with your legacy software. Questions you should ask yourself are: When reporting regulations change, what then? What do these delays cost us in terms of customers, orders, inventory, new business and our ability to adapt to changing market demands? Are investors getting the financials they want, when they want? How does this affect our bottom line?
Is it time to move on from QuickBooks?
You know you need to retire QuickBooks and move on when you are relying on a craft collage of Excel spreadsheets to deliver the financial data necessary to close a deal or comply with reporting regulations, let alone support and make strategic decisions. Is QuickBooks working well enough for you to determine your true cash balance, if at all? According to Accounting Today, a simple rule of thumb is if your company has 15 or more users requiring varying levels of access to read, input, amend, or create financial reports, it’s time to upgrade to an ERP system.
How do I start the process?
You need to produce a GAP analysis. This analysis should nail down where your current software is performing well and where it fails. It should identify your company’s current business strengths and weaknesses with particular attention paid to your financial processes and software systems across the company. You then need to set your future goals and decide what is necessary and what is icing on the cake from an ERP system perspective to reach your target. This should include the company’s projected expansion, the functionality you desire such as mobile or cloud computing and ease of optimization, and ability to integrate with other operational or customer systems. Then shop around to find the value added reseller, or VAR, that has a record with references of delivering what you need on time and on budget.