ERP Evaluation Process Blog Series: Formalizing the Need – Budgetary Approval and Documentation – Series 2 of 4

In my first blog post in this series, Identifying the Need for Change, I discussed the primary driver for investing in a new ERP system—more timely and accurate access to data. In other words, better reporting. The accounting and finance teams who most successfully helped their organizations transition to a new ERP system were able to qualify, and in many cases quantify, the need for improved reporting.

Once you understand the reasons for a new ERP system, the next steps are to document requirements, and confirm budgetary support for the project. Fortunately, these two activities are not unrelated. Working with your consulting partner, you can document enough business process requirements, communicated by your key stakeholders, in a couple hours. This will allow for an accurate estimate to be presented.

Do you have the budget for this project?
Project budgets for business systems are an odd topic. Whether they’re based on prior experience, a web calculator, or just a wishful estimate, these budgets usually lack the in-depth analysis to be remotely accurate. However, as discussed above, getting an accurate budget estimate doesn’t take as much time or effort as you might think. Reviewing and documenting process requirements and project objectives usually takes very little time, and the budget estimate that comes from this initial exercise will be pretty accurate. This is where working with an experienced partner is invaluable, for setting expectations and establishing a solid foundation for you to have a successful implementation.

Sometimes a company may require a more in-depth review and documentation effort before deciding on an ERP solution. Factors such as a company’s stage of growth, the speed at which they are evolving, and the management’s approach to that growth may take additional analysis. In these cases, it’s even more important to engage a partner to execute a detailed business process assessment.

During this assessment, the partner will interview all key stakeholders and process owners. Mainstream processes are catalogued from start to finish, and related exception cases are documented. One of the objectives of this assessment is to identify unique requirements that, if not identified, would impair the success of an implementation. A common example would be integration with another solution that impacts the “final resting” data. If this is not identified before defining the scope and cost of a project, there is an increased risk of a delayed go-live date, as well as a significant increase to the project budget.

Executing this assessment will produce a much more accurate scope and budget, and will give everyone realistic expectations. It may even save you from a potentially bad investment. For example, say you spend 10-20% of the overall estimated budget on performing an assessment. It uncovers issues that make the project too risky or reduces the expected ROI below your threshold. Now that you have accurate information, you decide not to make a significant investment in an ERP project that is likely to fail. If, however, the assessment doesn’t uncover significant issues, you now have a clear definition for a successful implementation.

A proper assessment is critical, because it helps you formalize the requirements and reasons for changing to a new ERP system. It can also serve as the foundation for a realistic budget—and protect you from potentially making poor use of your technology dollars. Given the complexity of today’s businesses and the significant investment required, a trusted consulting partner is critical to determining which—and if—an ERP system can deliver the reporting capabilities needed for growth.

I look forward to sharing in my next post series three of four: Identifying Partners/Vendors/Solutions―To RFP or Not to RFP.

Should you have any questions regarding this blog post, please contact us at FRC@rimerman.com. If you would like to receive a complimentary business assessment, please contact us to schedule an appointment with one of our consultants soon.

By Stephen Wolford, Director at Frank, Rimerman Consulting, the business systems consulting practice of Frank, Rimerman + Co. LLP., one of the largest locally owned accounting and business consulting firms in California. We serve a growing list of clients globally. Frank, Rimerman Consulting delivers SaaS Corporate Performance Management (Adaptive Insights), Enterprise Resource Planning solutions (Intacct, NetSuite, Microsoft Dynamics GP) and value-added consulting services to organizations of all sizes. With deep finance, technology, and industry expertise, we help clients gain operational and cost efficiencies.