NaN-tic Nov 1, 2018
An ERP costs time and money, exactly what it does not like to offer a financial director. But it is also gives control and optimization of resources. We explain at this point what benefits it can bring to your area and how we can help you quantify the investment that will have to be made.
The Financial Manager
This figure is usually the ‘bad guy’ of the film. His work involves the economic monitoring and control of the company and analysing how resources can be optimised. Therefore any new investments might be seen to come at a bad time, or as excessive, or not properly justified. Or all three at once.
You’ll need to make an effort and overcome his initial resistance and win him over for the cause. The way to do this is to show him the benefits of the tool you’re considering will have for the company as a whole, and for his own job in particular.
An ERP is basically a control system. It involves the unification of data entry, greater tracking capacity, less circuits and internal processes, the ability to improve planning and production, greater capacity for analysis, and ultimately, more and better information on which to base strategic decisions.
However, despite all of this, an ERP costs both time and money. On the one hand it involves an important economic investment that will determine the day to day operation of the company, and even its growth possibilities in the short and mid-term. However on the other hand, it will also require many hours of work in the selection process, during implementation, in the training phase, and finally in adapting to the new system by practically all members of the company who will need to enter data into it. The presence of the Financial Manager in the process is therefore highly necessary.
And now we come to one of the most complex questions: “How much is an ERP?” Although the easiest answer would be “Whatever you want to spend”. Open source ERP programs are free. Program cost = 0. While there are also products on the market that are aimed at large corporations, which are highly expensive. Although, this doesn’t really mean much. An ERP cannot be installed like a mobile phone app, it requires many hours of IT engineer work, as the program takes information from where it’s needed, it processes it as required and then displays it in an appropriate manner; and all this needs to be analysed beforehand, carefully, in order to ensure that unexpected surprises do not arise. Furthermore, it must be integrated with other tools and databases already installed in company servers, migrations need to be made, tests need to be carried out and users need to be trained before the ‘launch’ – a word which produces both enthusiasm and anxiety in equal measures among those who have purchased the product and those who sold it to them.
And that’s not all there is. Purchasing an ERP or a similar management tool has nothing in common with any other purchasing process or service acquirement procedure. Normally, when you buy a program, you are informed about the price and normally the support or maintenance costs, or even the annual program licence renewal costs. But then come the extras. It turns out that the database management system you’re using also needs a licence. And this licence might just happen to be renewable too. And maybe when you need new versions of the program, you’ll need to renew it with some extras, and so on. In fact, it’s extremely difficult to say how much an ERP costs, but it’s even more difficult to say how much it’s going to cost. In order to avoid misunderstandings, we provide our clients with a list of the associated costs that may be involved in the purchase of a tool of this type. The list may vary from one purchase to another, but in general terms, it looks something like this:
Not all the extras on the list are compulsory, nor do they necessarily come at a price, but it is essential to establish what they are. You need to ask if each of these items is included in the estimate presented to you, and where this is not the case, ask that these costs be detailed.
Therefore, accept that you’ll need to assign an annual budget for maintenance of the tool and you will have to put pressure on your supplier so that he provides you a simulation of the annual cost for the purchase and the maintenance of the tool over the first three years, for example.
If the final cost of the operation exceeds your most pessimistic forecasts, you still have two options left open: one – evaluate what phased (gradual) implementation would cost. This means beginning with the smallest possible investment and increasing program use as the financial capacity of your company grows. In this sense, open source software, apart from eliminating all expenses related to operating licences, usually provides greater flexibility too, enabling improved adaptation to changing circumstances. Ask your supplier about the minimum investment you need to launch the system and the implementation roadmap for the coming years.
The other option is to use what is known as SaaS (Software as a Service). You’ll lose flexibility, because the program cannot be adapted too much (or hardly at all) to corporate needs, given that it will be installed in an external server (cloud). This option means that you pay a monthly fee for its use and maintenance while forgetting about new versions, licence renewal and other options unattractive to your Financial Manager. The problem is that some potentially interesting products may not be very useful for your company and you will have to eliminate them from your list.
Conclusion: Choosing the right ERP is difficult, but it is even more difficult to guess the impact that it will have on company finances. Ensure that all meetings on this issue include the attendance – and participation – of the Financial Manager.
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