Why ERP Implementation and Integration Is Important for SMBs

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Lessons from ERP System Conversions: Avoiding Common Pitfalls

Two of our larger clients went through system conversions in the last five years in the hope of implementing an all-encompassing ERP software solution. What was supposed to be a straightforward project with well-defined deliverables and a reasonable timeline turned out to be the exact opposite for both companies: Major budget overruns, long delays in achieving practically every project milestone, and seemingly endless customization and software code modification to accommodate everyone’s needs.

The Challenges Faced

One thing common to both implementations was that all planned integration of the new software with existing software and sub-systems still had issues after the implementation was complete, and some still don’t work as expected to this date. What was evident was the large number of outside consultants and the extra stress on company employees having to interact with the consultants and participate in testing and other project activities.

Even though our firm was not directly engaged in these implementations, our work in helping with consolidated financial statements was greatly impacted, as the data available to us to do our work was at times unreliable and insufficient due to poor integration and questionable report-writer scripting.

A Common Experience

I imagine many readers of this blog don’t find this experience particularly unusual. Most people with enough experience in accounting or finance, working for even mid-sized organizations, experience this from time to time, especially with company acquisitions, mergers, and other drastic changes to their business organizations, where existing systems are determined to be insufficient or lacking in certain areas, or perhaps unable to deliver on the reporting requirements of management.

Unfortunately, such projects are not limited to only very large companies, where there usually is a legitimate need to implement a better solution or perhaps more efficiently integrate existing systems with a centralized accounting and finance package. It is also not surprising that in smaller organizations, this can be very taxing on the company and its employees (and indirectly, customers and vendors) and will pose a long-term financial burden, at best.

The Pitfalls for Smaller Companies

Often, smaller companies attempting to improve their information systems, streamline operations, and upgrade reporting, get very bad advice from IT and software solution vendors and their partners/consultants. It usually ends with the customer making purchase agreements and engaging the vendors in projects that at times seem will never end, all to the detriment of the customer. Once the software is implemented, the customer is usually committed to it for a length of time (SaaS solutions), or is so involved in the new implementation and conversion of the old data, that no reasonable changes are possible for a long time.

The costs sunk into such projects can be significant, even for a smaller company. In the case of ERP software implementations, I’ve seen consulting costs to fully implement a system exceed the initial perpetual license fee by 400%-500%. In the case of SaaS delivery, although there is no large up-front licensing expense, consulting expenses can still be sizable and often exceed the original budget. Planning, budgeting, and analysis software is sometimes as difficult to implement as ERP solutions, and the integration to the ERP software accounting G/L can be difficult and almost always requires outside consulting.

A Better Approach for SMBs

SMBs should choose a more reasonable approach and maximize the out-of-the-box installation experience, with minimal customization. The entire package can be installed by the customer (on-premise version) or is ready to implement and use immediately (Cloud version). With a solid G/L, many of the more popular accounting G/Ls are available to automatically link to a built-in G/L. The overall implementation time and expense are minimal, and you can be up, running, and productive within days or weeks, and not months or years.

Benefits of a Simplified Implementation

The best part is that users don’t have to give up functionality with this approach because the system was designed to be adapted to almost any business type. With its built-in business rules and built-in GAAP-compliant accounting rules, you get a system that uses the budget to drive all financial statements in perfect synchronization with one another.

To me, this is the best of both worlds: Quick and inexpensive out-of-the-box functionality and immediate integration with the accounting system (automatic for several popular G/Ls, or through an export-import step for all others). This quick, predictable, and inexpensive implementation is something I think SMBs can't afford not to consider.

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