When Is it Time for a New ERP System?
The absolute best time to implement an ERP system is also the most inopportune time–a month or two before the founders open its doors for business.
But that’s typically not practical as the cost would be exorbitant out of the gate.
With multiple ERP implementations under my belt, you may be surprised at when I believe it’s time to move from QuickBooks™ to a newer system that can seemingly do anything with its eyes closed and both arms tied behind its back.
Everyone Is an Expert
I cringe every time I hear a CEO tell me he’s been told he/she should move to “this” or “that” [ERP] system. The first question I immediately ask is, “Just how well does that person know your business?” After some hesitation, the typical response is, “Very little.”
My first two clients back in 2001 used Peachtree™ and QuickBooks™, respectively. I confess that I was a financial snob back then. I laughed at those systems and even poked fun at them.
But then I woke up and realized small businesses would be overwhelmed with more complex systems. Frankly, most businesses can get by just fine with these shrink-wrapped packages. That’s especially true if you can integrate a bolt-on tool for inventory management, job costing, point of sale, and so much more.
3 Reasons You Don’t Need That ERP System (Yet)
I was once the CFO and Controller for an award-winning newspaper and custom publisher. I’ve already lost count how many disparate systems we had. While we used Great Plains, we only used it for our general ledger. We had separate systems for job costing, newspaper subscriptions, classified adds, payroll, and at least two other smaller systems.
But wait, we had an ERP system–Great Plains.
And therein lies the fallacy. Not all ERP systems can do it all. Therefore, you need to consider why the following three reasons do not justify a move to a new ERP system.
1. I Need More Reporting, I Need Better Reporting
This one is actually humorous. Yes, we had Great Plains, but the default reporting was terrible (and still is, albeit Great Plains has undergone a name change). My team used FRx for financial reporting. For data mining, we exported the data and used either Excel or Crystal Reports.
Under no circumstances should you move to a new ERP system for better reporting alone. If you do, you’ll still need BI tools in addition to the system you are implementing. Why do that when you can cull the data from various systems and park them in a data repository. You can then use tools like Tableau or QlikView to analyze your raw data.
Is this a perfect solution? No. But it’s far more inexpensive than the alternative.
2. I’m Frustrated with Duplicate Tasks and Duel Data Entry
Believe me, I get it. I’m a process junkie. I’m an 8-8-2-2 on my Kolbe score. In lay terms, that means I’m a systems person all the way. So yes, I can relate to the users who are frustrated with these inefficiencies.
This is actually a reason to move to a new system. But hold on.
I guarantee you will spend $250,000 or more for your first ERP system regardless of your industry. That number may look high, but I’m including VAR time to help with the implementation.
Thus, the cost of inefficiencies may be far lower than implementing the new system. Keep in mind that the learning curve will be high, and that plays into the overall cost of the new ERP system too.
I’m not saying never to migrate. What I am saying is that you can afford the cost of inefficiencies until you are absolutely certain you will yield a significant return on your investment.
3. The Entire Management Team Is Fed Up with QuickBooks™
Similar to the points above, I’m emphatic with this reasoning too, but only to a certain extent.
Do some Google searching on failed ERP implementations, and the results will be striking. The grass is not always greener on the other side of the fence.
If the team is fed up with QuickBooks™, it’s time to start justifying why a new system is needed and what the requirements are. That takes time, and the fact that it takes time means the problem may not be as severe as it appears to be.
I’m not defending QuickBooks™. I’m guarding against a move to a new system when the management team is not ready for a major culture shock.
For every problem you currently have with QuickBooks™, there is a workaround. It may not be pretty, but you can make it work.
Let’s use CRM as an example. If you have lots of customers or clients, your greatest asset is every piece of data and metadata about those customers and the sales history you have with them. QuickBooks™ will start drowning as sales data mounts in that system. In that case, I’d highly recommend a CRM/sales automation solution like Salesforce and sync it with QuickBooks™.
I realize this may not be practical in all cases. The bigger point is to research options that can seamlessly integrate with QuickBooks™ before making the large outlay on a new ERP solution.
So When Is it Time to Move to an ERP Solution?
The short answer is to wait as long as possible. Long enough until the duct tape on the current disparate systems no longer works and interaction with your customer base is starting to suffer. Long enough until your growing and complex systems and processes like inventory management are breaking your current system.
As mentioned earlier, you need to clearly document your specifications for a new system, and be as specific as possible. You need to be able to clearly articulate how your new workflows will improve over your current processes.
For those of you in e-Commerce, large professional service firms, and manufacturing, hire an expert to analyze your current setup and let them help you in the selection process.
I still like to poke fun at QuickBooks™, and for good reason. But your life will never be the same once you head down the ERP migration path. That’s especially true if you get it wrong (ouch!).